Previously, college athletes could not share in the revenue generated by their universities, however a landmark Supreme Court ruling in 2021 enabled them to earn advertising revenue based on their name, image and likeness (NIL).
This ruling has opened doors for student-athletes who, because of the change in NCAA rulings, can now make money off their own personalities and licensing deals. Personal estate planning has become even more important, as these students may benefit quicker than expected. With colleges and universities now working with NILs, there are new considerations that need to be made to protect the individual.
Estate Planning for Student-Athletes in Texas (beyond college financial planning)
The Patient Advocate Designation and Living Will is the bare minimum for estate planning that every athlete should have. These documents can save time in a serious situation. This is beyond financial planning for a college athlete.
The Reality of Estate and Power of Attorney
A Durable Power of Attorney (DPOA) is a document that allows someone else to make legal and financial decisions on the athlete’s behalf. The document can be structured so it is effective immediately upon signing or only upon incapacity. Since student-athletes are usually 18+, they have to transact on their own, meaning the agent will have the same power over the athlete’s assets as the athlete would have.
The athlete could appoint their agent to act as a conservator, in case there is any incapacity. If the power of attorney is not in place, the assigned conservator will make decisions for them until all ties are cut. The appointed conservator is different from the athlete’s agent, who regulate business contracts and opportunities for them to sign endorsement deals or sponsorships.
Estate Planning for Student-Athletes: Income Taxes
If a person is an athlete, they can generate income in one or more states and need to be aware of their tax filings.
What NIL does for student athletes
Few student-athletes will make it to the professional ranks and those who do end up playing at the professional level have a high chance of ending their careers in under five years.
As a successful athlete, you need to develop a strategy that includes your personal attorney, accountant, agent and financial advisor. Your strategy should include estate planning documents, tax planning advice and asset protection.
Exploring student-athletes’ estate planning
Trusts can help younger athletes protect themselves from being taken advantage of, especially when they use professionals as trustees. Trusts can also provide distributions to be used for things like housing and health care, which may not be possible without the trust. Trusts are also private and limited to a particular person’s name, so the assets do not need to go through probate court after the creator dies.
How to plan and file an estate plan for student-athletes
Athletes should be mindful not to make large gifts when coming into wealth, as it can restrict the athlete’s assets and even lead to a tax bill.
In 2022, you will be able to gift up to $16,000 to another individual without having to file a gift tax return. However, anything with a value above $16,000 will require the filing of a gift tax return and may incur estate tax. If Congress does not act on the estate tax exemption by 2025, it is possible that the entire lifetime exemption could be used because of substantial gifts made in the past.
People with large sums of money often use trusts to give assets to beneficiaries. These trusts are irrevocable, so there’s no filing requirement for gift taxes when it comes to assets in a trust.
Find out how you can protect your student-athlete’s estate
Trusts are often used to protect your assets in the event of lawsuits. These trusts are becoming popular and useful in certain states, but they do have their drawbacks. For instance, one disadvantage is that you must give up control over the assets in the trust to another party, who manages them for you and is not designed for easy or quick changes. In some cases, DAPTs work best for those with high risk occupations who are subject to lawsuit liability.
Brand new plan for athletes, NIL. It’s uncertain how it will play out, but athletes can earn a high level of income through their college years, which never before has been available to them. They now have the ability to make money at a high level and it could last beyond college. It will be beneficial to build a team of trusted advisors who will help the athlete earn, protect, grow and tax-efficient with their assets.
Do you need to hire an Experienced Estates Attorney to Protect your student athlete’s estate?
As a student athlete, you have a lot on your plate. You’re juggling school, practice, games, and maybe even a job. The last thing you want to think about is what would happen to your estate if you were to pass away.
While it’s not something anyone likes to think about, it’s important to have a plan in place in case the worst should happen. That’s where an experienced estates attorney comes in.
An estates attorney can help you put together a plan that will protect your assets and make sure your loved ones are taken care of if something happens to you. They can also help you navigate the complex world of estate taxes and make sure everything is done according to the law.
Don’t wait until it’s too late to plan for the future. Contact an experienced estates attorney today to get started on protecting your student athlete’s estate. Call us today for a FREE attorney consultation. (281) 219-9090.
