A trust is an important estate planning tool that can protect your assets and distribute them to your loved ones according to your wishes after you pass away. When a trust is created, the trustmaker appoints someone else (the trustee) to manage the accounts and property placed inside the trust for the benefit of the beneficiaries. When people refer to a trust, they are usually referring to the document that outlines the trust details. Depending upon the type of trust created, this document can protect the trustmaker’s accounts from creditors, divorcing spouses, and lawsuits, and it can help provide for the trustmaker’s family after they die.
Even famous athletes can benefit from an estate plan that involves a trust. Here are a few examples of athletes who used trusts to protect themselves and their loved ones. You can research more on each case to learn some valuable lessons.
Allen Iverson played professional basketball for teams like the Philadelphia 76ers and the Memphis Grizzlies until his retirement in 2013. Over the course of his career, he made over $200 million, but in 2012, he experienced financial troubles due to an outstanding creditor issue.
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. The trust and the assets it holds will become accessible to him when he turns fifty-five years old in 2030. Although the specific terms of the trust are not public knowledge, and his ex-wife may be entitled to a percentage of the trust, this plan protects a large part of the Reebok contract for Iverson’s future use.
Lesson: A trust can help you set aside money or property for a future date. Depending upon his current legal situation and the terms of the existing trust, Iverson could meet with an estate planning attorney and financial advisor to develop an asset protection plan before the first disbursement is made. If he manages this money well, it can support him through a comfortable retirement.
Michael Carter-Williams, a player for the Orlando Magic, decided in 2013 to put the salary he received from the Philadelphia 76ers into an irrevocable trust to be managed by his mother and a family friend. He lived off his endorsement deals instead of his salary, and according to the trust terms, Carter-Williams could not access the money for three years.
Carter-Williams was young, did not have children to support, and did not have any problems with creditors when he made this decision, so with the oversight of his trusted advisors, this trust can offer him a source of income whenever he may need it later in life.
Lesson: An experienced estate planning attorney can craft a customized plan that will provide what you need both now and in the future. While you make your estate plan, you may want to avoid a large tax burden, protect your accounts from creditors, or protect the inheritance you are leaving your loved ones. The right plan can address each of these issues.
Kobe Bryant died in a tragic helicopter accident on January 26, 2020, while owning an estate worth over $600 million. Proper estate planning ensured that his wife and children were cared for.
He made just one mistake by failing 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 at the time of his death.
Lesson: Update your documentation to make sure your wishes are carried out. Once you have signed your estate planning documents, review them every year and ask the following questions:
- Have I had any life changes that 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 my top choices?
- Do I want to change the types of items or the number of assets that I am leaving to my beneficiaries?
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