How about Lenny Dykstra, former baseball star? He had failed car washes, a magazine company, real estate investing, and a stock trading website. Yet, he owed more than $30 million dollars to creditors including $18 million on a house he purchased from Wayne Gretsky.
Latrell Sprewell. He turned down a $21 million dollar contract because he said it wasn't enough money to feed his family. He made over $96 million in his career, but lost his million and a half dollar yacht after the U.S. Marshall seized it for defaulting on the note payment. His $5.5 million dollar house went into foreclosure in 2008.
And of course, Mike Tyson squandered $350 to $400 million dollars. He spent $4.5 million dollars on cars alone. He had a $2 million dollar bathtub; a $140,000 for Bengal tigers. Tyson received much publicity that gave him a game changing outlook on life when one of his tigers was kidnapped by drunken bachelors in the lampoon film “The Hangover”, but don’t believe this will erase his debt.
What about Eddy Curry? He's currently earning $10.5 million dollars a year. He pays $6,000 a month to his personal chef, $17,000 per month in rent, $30,000 per month in household expenses. He gives his parents and his father-in-law $16,000 a month and has seen 12 of his cars driven off by relatives. In the year 2009, Eddy Curry asked his boss, the New York Knicks for an $8 million dollar advance to help with his financial problems, but the team only gave him $2 million dollars. He also sued a former agent for mishandling his money. His mansion is in foreclosure and he's borrowed almost $4 million dollars against the house already.
Or how about these statistics? The average salary in the NBA is over $5.5 million dollars yet an estimated 60% of players are broke within five years after retiring. Seventy-eight percent of NFL players are bankrupt or under financial stress because of joblessness or divorce within two years after retiring. Many baseball players struggle financially after retiring. In 2009, ten current and former baseball players, including Johnny Damon of the Yankees, Jacoby Ellsbury of the Red Sox, Mike Pelfrey of the Mets, Scott Eyre of the Phillies discovered that at least some of their money was tied up in the $8 billion dollar fraud allegedly perpetrated by Texas financier Robert Allen Stanford. In fact, Pelfrey said that 99% of his fortune is frozen. Eyre admitted last month that he was broke.
How (and Why) Athletes Go Broke. PABLO S TORRE. Sports Illustrated.: 2009 NCAA TOURNAMENT PREVIEW New York: March 23, 2009. Vol. 110, Iss. 12, p. 90
According to the SI article “Why pro athletes go broke”, ten of baseball’s big leaguers discovered that portions of their earnings were tied up in the $8 billion fraud allegedly perpetrated by Texas financier Robert Allen Stanford. One of the players told the New York Post that 99% of his fortune was frozen and another admitted his was bankrupt.
Consider the following statistics:
Following two years of retirement, 78% of former NFL players are bankrupt or under financial stress because of joblessness or divorce.
Within five years of retirement, an estimated 60% of former NBA players are bankrupt.
Depending on where you are in your professional career, your short term personal goals for athletic performance are set by you and your coaches -- but what about your short and long term goals for financial management?
What do you want to do when you retire from the game?
How do you plan to financially support your retirement lifestyle?
Who should be managing your investments now and in the future?
When do you want to retire from the game?
How do you choose a team of trusted advisors who will represent your best interest?
In this book, you will gain insight into how to manage your wealth. (Since the book does not just focus on management of wealth, expand this comment to include all) We have included findings from a variety of professional athletes who have discovered ways to successfully manage their money and life experiences. We have researched and presented ways to help you manage other aspects of your personal life. Chapters in this book cover:
Please enjoy the book and make it your Goal to be successful!
Contact:
Catherine Hicks
(423)-645-9403
Asset Protection
Roccy DeFrancesco, J.D., CWPP, CAPP
This chapter is trimmed down version of the volumes of material I have on this subject matter (in other words reading this chapter is just the beginning of your education on proper asset protection).
What is asset protection? The term used by most in the mainstream means protecting someone’s wealth from negligence lawsuits (which is what this chapter will focus on). However, I want to remind readers that there are many other creditors who are more likely to take your money than someone who files a negligence lawsuit against you.
Your number one creditor every year is the IRS. Therefore, it is important to mitigate income, capital gains, and estate taxes whenever possible.
The stock market can be a creditor. If you had money in the stock market during 2000-2002 (-46%) and 2007-2008 (-59%), then you know the stock market is a creditor. It is imperative (especially for athletes who notorious receive terrible long term financial planning advice) to make sure your money is properly allocated where you have some portion of your money in wealth building tools that will not go backwards when the stock market drops significantly.
The number one creditor of many seniors is long-term care (LTC) expenses. While most affluent athletes who have their money properly protected from market crashes should have sufficient money to pay for LTC expenses (which many times are incurred earlier in life due to sports related injuries), the average athlete will not. Even if you are considered an affluent athlete, many times it will make more sense to fund for your LTC expense now when it is most affordable (vs. paying out of pocket for the expenses when incurred). Additionally, with proper planning (many times done through a charitable foundation), athletes can fund for LTC expenses in a tax deductible manner where the accumulated money can grow tax-free and be removed tax-free.
Unique Asset Protection Problems of Athletes
There are many wonderful things about being a professional athlete. Fame and fortune are what come to mind to the average person on the street. There are millions of Americans who if asked would trade places in a heartbeat to play on an NBA, NFL, NHL, MLB, etc. team or be able to play professional golf, tennis, etc. to make a living.
As someone who played varsity soccer at The Ohio State University and golf at Embry Riddle Aeronautical University in Daytona Beach, FL, I had thoughts/dreams of becoming a professional athlete (it’s the dream of many young men and women).
However, with the “fame and fortune” some professional athletes obtain come worries and liabilities that non-athletes do not have to worry about.
Fame can be bad when you run into the wrong people in the wrong circumstances. Let me give you a classic fact patterns that we see over and over with professional athletes and entertainers.
Nightclubs—It’s no secret that some young and successful athletes like to go out on the town. Known athletes are treated many times as quasi rock stars when seen out in public. It’s an adrenaline rush for an athlete to walk into a nightclub and have everyone turn their eyes to them and knowing that many people envious of their position in life.
Unfortunately,