Request a Meeting

Request a Meeting

How Trust-Driven Estate Planning Can Help Professional Athletes

Jason Baugh, CFP®

Director of Financial Education

Last Updated
April 07, 2022

And Athletes Who Benefitted From Trust-Led Estate Planning

Trusts are a vital financial and estate planning tool that can protect your assets from creditors and help ensure your loved ones are taken care of after you pass away. Trusts can be especially important for professional athletes, who frequently build significant wealth in a short period of time and must preserve and protect this wealth over many years before passing it along to their heirs, all while trying to avoid estate taxes. Talk about pressure.

There are several important reasons to consider implementing a trust if you are a professional athlete.

  • A trust is an efficient vehicle to help you invest money for the future, protect your wealth from creditors and reduce your taxable estate.
  • Not only can trusts be used to pass assets along to the next generation after you die but they can also protect your wealth and provide a steady source of income while you’re alive. It’s never too early to begin the estate planning process.
  • When incorporated as part of your overall financial plan, a trust can serve as a dynamic planning tool that evolves over time as your life, family situation and goals change over time. Completing estate planning and overall financial planning together helps ensure your trust is consistently reviewed and updated as life changes occur.

Real-World Examples

Still not convinced of the importance of having a trust in place? The following athletes benefitted from taking time to establish trusts as part of the estate planning process.1

Allen Iverson protected $32 million.

Allen “The Answer” Iverson played professional basketball from 1996 until 2013, making an estimated $200 million over the course of his career, including contracts and endorsements. By 2012, Iverson was experiencing financial troubles due to an issue with an outstanding creditor.

Fortunately, “the answer” to his problem was found in a trust. As part of a deal signed with Reebok in 2001, Iverson receives $800,000 per year and placed a lump sum of $32 million into a trust that he will be able to access in 2030 when he reaches age 55. While the specific terms of the trust have not been disclosed, Iverson’s advanced planning successfully protected a large part of his earnings for future use.

Michael Carter-Williams put his entire salary into an irrevocable trust.

In 2013, 22-year-old NBA Journeyman Michael Carter-Williams decided to put the entire salary he earned from the Philadelphia 76ers into an irrevocable trust managed by his mother and a close family friend. Carter-Williams lived off his endorsements, as a stipulation of the trust was that he could not touch the money held within it for three years.

This was a thoughtful financial move for a young athlete with no creditor issues and no family to support. While his exact reasons for executing this strategy are unknown, he may have been establishing a source of lifetime income to support himself in the future.

Kobe Bryant provided for his family.

The beloved professional basketball player Kobe Bryant passed away in a tragic helicopter accident on January 26, 2020, along with his daughter, Gianna. Fortunately, his $600 million estate was protected in a trust, which effectively reduced his family’s estate tax liability, kept his estate private, and transferred his wealth directly to his loved ones while avoiding the timely and costly probate process.

As a side note, Bryant unfortunately had not updated his trust following the birth of his youngest daughter to include her as a beneficiary, which means she was not legally entitled to any of his assets. This is a good reminder to review all estate planning documents on a regular basis and as major life events occur to help ensure all your loved ones are provided for according to your wishes.

So, what’s an athlete to do? Surprisingly, one simple question asked in the context of an estate plan can go a very long way to ensuring you and your family will be taken care of for generations to come. Ask yourself, “What do I want my legacy to be?” Whatever the answer is, we’re here to help.

If you’re interested in learning more about how trust and estate planning can help protect your wealth and family, Creative Planning Sports and Entertainment is here for you. We specialize in helping professional athletes navigate the unique challenges of their profession while remaining on track toward achieving their long-term financial goals. For information on how we can help you begin the estate planning process, or for help with any other financial planning matter, please schedule a call.

Footnotes:

  1. https://www.wealthcounsel.com/
Let’s Talk

Find out how Creative Planning can help you maximize your wealth.

This commentary is provided for general information purposes only and should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

Recent Content

“Your wealth works harder when it works together.”

Peter Mallouk

President & CEO, Creative Planning

Serving Clients Nationwide

50

STATES & ABROAD

Providing financial peace of mind across the globe

$225

BILLION

Combined assets under management & advisement as of December 31, 2021