Does a wealth preservation attorney representing some of the richest and most famous people in the world – professional athletes – differ from those representing so-called “regular people”?
Some lawyers will say, “Well, you’re still just doing wills, trusts, LLCs, maybe a prenup or two. Isn’t it all just the same for everybody who has a few bucks to protect?” In some ways, yes. The core issues are frequently the same: making sure that the right people inherit in the right ways and are named to handle financial and personal matters in the event of death or incapacity; minimizing estate and income taxes; protecting wealth from erosive elements such as probate and the truly devastating factors such as divorce, business failures and judgment creditors.
But in many ways, representing professional athletes is nothing like anyone could imagine. Here’s why:
- Everything is amplified to the Nth degree. These days, professional sports compensation numbers are astronomical. How about this NBA client? Great guy and solid citizen, 30-years-old. Above average player, but not a star or household name. He signed a four-year, fully guaranteed deal worth in excess of eighty million dollars. $80,000,000! (“Even I can’t get my head wrapped around this,” says the player/client. “It’s funny money to me.”)
- How long would a dentist have to work to make that?
- And it’s not just the money. He is a prime target.
- A target for every family member who has wants or needs. (Try getting this client to give you a total of “give away” money at gift tax return time.)
- A target for every “friend” with a foolproof business idea. (For the record, most sports bars fail, as do clothing and high-end shoe stores, not to mention recording studios and record labels.)
- A target for everybody with a telephone camera. Did your client ever hire a driver, cook, cleaning lady or nanny needing to use a written employment agreement with non-disclosure and liquidated damages clauses so that the selfie – or worse – doesn’t show up on TMZ? Bet not.
- The spotlight shines brightly. Financial, marital and other legal problems? You are unlikely to need to advise “regular” clients to have a “statement” ready because by the time that he gets home, the satellite trucks will be parked out front. Maneuvering amidst that clangor makes the lawyer’s job harder. Much harder.
- And while we’re at it, most non-celebrity clients don’t have “handlers.” It’s one thing to vet ideas with the financial advisor and CPA. It is quite another to battle through the circle of an agent, publicist, “personal assistant,” high school coach, and lifelong buddy to ascertain what your client really thinks, needs and wants.
- The earnings curve is inverted. Most high earners have reasonably predictable (and upward) earnings curves and wealth accumulation rates. Shifting wealth in order to leverage income and estate tax savings is based on predictability. These clients work for a long time and long-range, sometimes multi-generational, planning is the goal.
On the other hand, it’s almost impossible to accomplish this planning when most or all of the wealth is accumulated over three to ten years prior to age 35 typically followed by “retirement.”
How can we talk about aggressive gifting strategies when we can’t accurately compute the post-career asset “burn rate”?
“Retirement”, for most of us, is a place in Florida, exploring hobbies, doing charitable work and minding the grandchildren – endeavors that in retirement we would at last have time for. For a pro athlete, too often without a plan made well in advance, what we have is an able-bodied person under 40 with no skills, vision, guidance or support. That’s sometimes when the trouble really starts.
We counselors have to not only predict the finances, but also guess at human nature.
- Background and lifestyle disconnect. Maybe not all, but lots of people with substantial wealth come from backgrounds of wealth and education. Maybe not all, but lots of professional athletes, do not have that same background, or the necessary tools, education and family experience. Many (but definitely and. thankfully, not all) are from shattered families and hard environments. The vigilant ones, with dedicated and trusted family members and advisors, build a foundation of knowledge and prudence.
Sadly, others are part of the depressing statistics about the many pro athletes who made millions and have nothing left.
That’s another big difference. Most of the “regular” clients keep, protect and grow what they make.
All but the most dedicated and disciplined professional athletes – those who not only engage, but also listen to, competent advisors – don’t.
David N. Pessin is the Co-Founding Member of Pessin Katz Law, P.A. (PK Law) and has been practicing law for over 36 years. He is one of the few attorneys in the area who regularly plans for and advises professional athletes and broadcasters in personal and business matters and has established a solid reputation as a valuable resource for American and international athletes and broadcasters. David can be reached at email@example.com or (410) 339-6762.
This article originally appeared in the November 2017 issue of the Maryland State Bar Association.