Effective estate planning takes into account many things. It’s not just about how your assets are treated when you die, it’s about protecting your assets during your lifetime.
Trust instruments are an important vehicle in the effective estate planning toolkit. A trust is a relationship between the person creating the trust, the settlor (sometimes called the grantor or trustor) and the trustee who manages the trust assets for the benefit of the beneficiaries. Trusts can be used for a variety of purposes e.g., providing for the settlor’s incapacity; protecting the settlor’s assets from divorcing spouses, bad financial decisions, lawsuits, and creditors; providing for loved ones, and potentially minimizing tax implications.
Everyone could benefit from an estate plan, regardless of how large or small their estate. And anyone with assets can profit from the use of a trust, as part of their comprehensive estate plan strategy. There are many reasons people choose to have trusts instead of simple wills. Among the reasons are privacy of information, avoiding probate, and protecting beneficiaries from themselves. Below are a few lessons athletes learned from having or not having valid trusts.
Allen Iverson and Reebok.
Allen Iverson, also known as The Answer was drafted by the NBA in 1996, as a first round pick. He had a stellar career and retired when he was still relatively young at 34. His career achievements are many. And the money he reportedly made during that time was estimated to be in excess of $200 million. That amount included his basketball contracts and endorsement deals. But like many young celebrities who make a lot of money quickly, he found himself in financial trouble. Lots of trouble.
Reebok saves Iverson the day. Thanks to a lifetime contract with Reebok, and several stipulations, Allen Iverson is due to receive a $32 million trust fund payment, in 9 years, when he turns 55. He will receive a $32 million trust fund payment when he turns 55, thanks to a lifetime Reebok contract. Had it not been for Reebok, Iverson would likely have lost all of his money on poor choices.
Instead, annually, Reebok pays him a salary of $800,000. If he blows that, so be it. But at least if he is still alive, he will be sitting pretty. The specific terms of the trust are unknown, and there is a chance his former wife will receive a large portion of the money. He will still have enough money to live more than comfortably.
Take away: Having a well drafted trust can not only provide for you, but also for your loved ones, especially your student athletes. It can be the thing that stands between making bad choices and living comfortably as you get older.
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FRANCINE D. WARD, ESQ.
INTELLECTUAL PROPERTY & ESTATE PLANNING LAWYER
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