Athlete Wealth Management

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 12, 2023

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Athlete Wealth Management: Overview

Athlete wealth management is a specialized financial planning and investment management service designed specifically for athletes.

This service is provided by financial advisors who have expertise in managing the unique financial needs and challenges faced by professional athletes, such as managing fluctuating income streams, dealing with endorsements and sponsorships, and preparing for retirement.

Athlete wealth management typically involves a comprehensive approach to financial planning, including budgeting, tax planning, investment management, insurance planning, and estate planning.

Advisors work closely with their clients to understand their financial goals and create customized investment strategies that take into account the unique demands and risks of the athlete's profession.

Financial Planning for Athletes

Creating a Budget

Understanding Income Sources

Athletes must understand the various sources of their income, such as salaries, endorsements, and appearance fees.

This understanding helps them create a comprehensive budget that considers all aspects of their financial situation.

Managing Expenses

Athletes should track and manage their expenses to ensure they are spending wisely and saving for the future.

Proper expense management includes setting spending limits, monitoring cash flow, and avoiding unnecessary debt.

Saving and Investing

Establishing Short-Term and Long-Term Goals

Athletes should identify their short-term and long-term financial goals, such as buying a home, funding their children's education, or starting a business.

These goals will help guide their saving and investment strategies.

Diversifying Investments

Diversification is essential for athletes to minimize risks and maximize returns on their investments. A diverse investment portfolio can include stocks, bonds, real estate, and other investment vehicles.

Tax Planning for Athletes

Understanding Athlete-Specific Tax Implications

Income From Endorsements and Contracts

Athletes need to be aware of the tax implications of their income sources, such as endorsements and contracts. Income taxes may vary depending on the type of income and the athlete's residency.

Jock Tax

The jock tax is levied on athletes who earn income in multiple states or countries. Athletes must understand these tax implications to ensure they are paying the appropriate taxes and avoiding penalties.

Tax Minimization Strategies

Deductions and Credits

Athletes should work with tax professionals to identify deductions and credits that can help reduce their taxable income and tax liability.

Tax-Efficient Investments

Investing in tax-efficient investment vehicles, such as municipal bonds and certain retirement accounts, can help athletes minimize their tax burden.

Estate Planning for Athletes

Importance of Estate Planning for Athletes

Estate planning is crucial for athletes to protect their wealth and provide for their families in the event of their death or incapacity.

Wills and Trusts

Protecting Assets

Wills and trusts can help athletes protect their assets, control the distribution of their wealth, and ensure their family's financial security.

Providing for Family Members

Athletes should establish wills and trusts that provide for their family members, such as spouses, children, and other dependents, in the event of their death or incapacity.

Charitable Giving

Philanthropy

Many athletes choose to give back to their communities through charitable giving.

Establishing a philanthropic plan can help athletes support the causes they care about while potentially providing tax benefits.

Tax Benefits

Charitable giving can offer tax benefits, such as deductions for charitable contributions and potential estate tax savings.

Risk Management for Athletes

Insurance Needs

Disability Insurance

Disability insurance can provide income protection for athletes in the event of an injury or illness that prevents them from competing.

Life Insurance

Life insurance can provide financial security for an athlete's family in the event of their death.

Protecting Against Financial Loss

Asset Protection Strategies

Athletes should consider asset protection strategies, such as forming legal entities and trusts, to shield their wealth from potential creditors and lawsuits.

Legal Structures

Incorporating or forming limited liability companies can help athletes protect their personal assets from business-related liabilities.

Building a Professional Team of Advisors

Importance of a Professional Team

A professional team of advisors is essential for athletes to navigate the complexities of wealth management.

These advisors can provide guidance, expertise, and support in various areas, such as financial planning, tax planning, estate planning, and risk management.

Types of Advisors

Financial Advisors

Financial advisors help athletes develop comprehensive financial plans, including budgeting, saving, investing, and retirement planning.

Tax Professionals

Tax professionals, such as certified public accountants (CPAs) or tax attorneys, can help athletes understand their tax obligations and develop strategies to minimize their tax liability.

Estate Planning Attorneys

Estate planning attorneys assist athletes in creating wills, trusts, and other estate planning documents to protect their assets and provide for their families.

Insurance Professionals

Insurance professionals help athletes identify and obtain the appropriate insurance coverage to protect their income and assets.

Types-of-Advisors-for-Athlete-Wealth-Management

Building a Trusted Network

Due Diligence

Athletes should carefully vet potential advisors to ensure they have the necessary credentials, experience, and expertise to provide reliable guidance.

Ongoing Communication

Regular communication with advisors is crucial to ensure the athlete's financial plan remains on track and adapts to their changing circumstances and goals.

Conclusion

Athlete wealth management plays a pivotal role in a successful athletic career due to the distinct financial challenges athletes encounter.

By concentrating on financial planning, tax planning, estate planning, and risk management, athletes can proficiently manage their wealth and safeguard their financial future.

Developing a comprehensive approach to wealth management empowers athletes to capitalize on their earning potential during their careers and protect their assets for the long term.

Building a professional team of advisors is a crucial aspect of athlete wealth management.

A well-rounded team of financial advisors, tax professionals, estate planning attorneys, and insurance professionals can provide guidance and expertise to help athletes navigate the complexities of wealth management.

By carefully selecting advisors, maintaining open communication, and conducting due diligence, athletes can create a trusted network of professionals that supports their financial goals and ensures their families' well-being long after their time in the spotlight has passed.

Athlete Wealth Management FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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