Estate planning is not just about what happens when you die. Proper estate planning takes into consideration all aspects of your life and how to protect your accounts and property so that you can receive the maximum use and enjoyment during your life as well as protect whatever you choose to leave to your loved ones upon your death.
A trust is an important planning tool used to provide this protection. In its basic form, a trust is a formal relationship in which someone (the trustmaker) appoints someone else (the trustee) to hold title to and manage the trust accounts and property for the benefit of one or more people (the beneficiaries). In most cases, when people refer to a trust, they are usually referring to the document that outlines the trust details. Depending upon the type of trust that is created, it can be used for many purposes, such as protecting the trustmaker’s accounts and property from the trustmaker’s creditors, divorcing spouses, and lawsuits, as well as providing for the trustmaker’s family if the trust maker passes away.
Everyone needs estate planning and could possibly benefit from the use of a trust as part of that planning—even famous athletes. The following are some notable athletes whose use of trusts to protect themselves and their loved ones offers important lessons.
Allen Iverson, also known as “The Answer,” played professional basketball from 1996 until his official retirement in 2013. During his career, he played for a number of professional teams such as the Philadelphia 76ers, the Denver Nuggets, the Detroit Pistons, and the Memphis Grizzlies. Over the course of his career, it is estimated that he made over $200 million (including contracts and endorsements). However, in 2012, it was rumored that Iverson was experiencing financial troubles due to an outstanding creditor issue.
But there was a saving grace. As part of a deal he signed with Reebok in 2001, Iverson currently receives $800,000 per year and had a lump sum of $32 million placed into a trust, which will become accessible to him when he turns fifty-five years old (which will be in 2030). Although the specific terms of the trust have not been disclosed, and his ex-wife may be entitled to half of the trust, this strategic planning has protected a large part of the Reebok contract for Iverson’s future use and enjoyment.
Lesson: Saving for a rainy day is an excellent strategy, and a trust can be a great way to set aside money or property for a future date. Additionally, it is never too late to get a proper estate plan in place. Depending upon his current legal situation and the terms of the existing trust with Reebok, Iverson should meet with an experienced estate planning attorney and financial advisor to develop an asset protection strategy for this money before the first disbursement is made. Through proper investment and management, this money should be able to go a long way toward ensuring a happy retirement.
Currently playing for the Orlando Magic, Michael Carter-Williams made headlines in 2013 when he decided to put the salary he received from the Philadelphia 76ers into an irrevocable trust to be managed by his mother and a close family friend. Instead of his salary, he lived off his endorsement deals. Per the terms of the trust, Carter-Williams would not have access to the money for three years.
Using a trust in this manner was a unique move because Carter-Williams was relatively young, did not have a family of his own to support, and did not have any creditor issues. This strategy was a thoughtful financial decision in light of what was happening in the industry at the time. While not much is known about the status of the trust, with the proper oversight by his trusted advisors, this trust can offer him a source of income whenever he may need it.
Lesson: An estate plan is not a one-size-fits-all product. With the multitude of planning strategies available, an experienced estate planning attorney can craft a plan that will provide what you need for today and tomorrow. During the estate planning process, it is important to consider your priorities. Are you looking to avoid a potentially large tax burden; protect your accounts and property from lawsuits, creditors, or a future divorcing spouse; or protect the inheritance you are leaving your loved ones after you have died?
The legendary professional basketball player Kobe Bryant died on January 26, 2020, in a tragic helicopter accident that also claimed the life of his daughter and other passengers. With an estate worth over $600 million, proper estate planning was crucial in making sure that his wife and children were cared for.
There are few details about the extent of his estate planning for one very good reason: he had an estate plan. The only misstep in the estate planning process was Bryant’s failure to update the Kobe Bryant Trust upon the birth of his youngest child. According to court documents, the trust had been amended each time one of his children was born, but because his youngest child was born in June 2019, he had not amended his documents as he had done in the past prior to his death.
Lesson: Estate planning is not a one-and-done task. To ensure that your wishes are carried out in the best possible way, the documentation must be up to date. Once you have signed your estate planning documents, we encourage you to review them each year. Ask yourself the following questions:
- ●Have there been any marriages, divorces, births, or deaths that might affect my estate plan?
- ●Are the individuals I have chosen as my trustee, guardian for my minor child, agent under a power of attorney, or healthcare decision-maker still the individuals I want?
- ●Do I want to change the types of items or amount of money that I am leaving to my beneficiaries?
We Are Here to Help
Estate planning can be difficult. It forces you to evaluate aspects of your life that may not be ideal. However, by diving in and addressing these concerns, we can help you craft a unique estate plan that will protect you during your lifetime and provide for your loved ones upon your death. Give your Madison Estate Planning Attorneys a call today to schedule your virtual consultation.