Planning to win: how athletes can protect their future finances

30 July 2018

This article was originally published in the July 2018 issue of World Sports Advocate.

What do Mike Tyson, Terrell Owens, and Boris Becker have in common? They are each outstanding sportsmen who have competed at the top level of their respective disciplines of boxing, American football and tennis. 

Over the course of their careers, they are together estimated to have earned a total of $505 million from competitions and endorsements. And yet, despite receiving these riches, each of them has been declared bankrupt.

Studies have shown that they are far from the exception. While few athletes experience financial troubles whilst actively playing sport, once players reach retirement, the chances of bankruptcy increase significantly.

By way of example, a 2015 study published in the American Economic Review[1] looked at historic data for NFL players (between 1996 and 2003) charting the length of their careers, their earnings and the number of players who declared bankruptcy after retirement. A regressive analysis of the findings found that one in six NFL players will declare bankruptcy during their retirement, the majority of those within seven years of retiring. Interestingly, the study found that the duration of the athlete’s career did not affect these odds: players with long careers (six - ten years), with supposedly more time to earn and opportunity to save, faced similar rates of bankruptcy than those with shorter careers.

Across the pond, the results of the Professional Players Federation ‘past player’ survey, which covered 800 former professional players in cricket, rugby and football, found that 52% of respondents reported financial difficulties in the five years immediately after they stopped playing, and 6% needed to take formal protection from bankruptcy[2]. In an age where men and women are now living until their late 70s and early 80s[3], it is essential for young athletes to engage professional advisors in order to plan for the future and avoid the all too common financial pitfalls.


There are many reasons why athletes struggle financially after retirement, although a lack of adequate advice is often a key factor. Young athletes may feel pressured to spend a large portion of income on depreciating tangible assets (jewellery, cars, luxury property), high risk investments or assisting loved ones financially. Professional advisors who can manage the athlete’s finances on a tighter string may offer a partial solution, but athletes are at risk if they engage the services of people who are trusted but inexperienced (such as family or friends) or place too much trust in individuals who are not acting in their best interests.

Unanticipated and unplanned for life events can also severely impact financial health. Whilst physical injury to a player is the most obvious, another common event is divorce[4]. Settlements are often hotly negotiated or litigated. The anxiety and stress associated with a relationship breakdown undoubtedly has a psychological impact, especially where children are involved.

The pitfalls illustrated above can be substantially mitigated or even avoided entirely by engaging the services of appropriately experienced professionals to provide advice on areas such as wealth planning and preservation, tax and family law.

Social security and pensions: UK, Italy and the US - is it enough?

The UK, Italy and US all have benefit and pension options available to athletes - some mandatory and others voluntary - which can provide some security after retirement. Unfortunately, most social security regimes cannot provide an adequate substitute for an athlete’s income.

The UK

Professional athletes in the UK are subject to the same level of state pension benefits, and to the same legal and tax regimes for private pensions, as ordinary workers. The exception is that individuals who joined a pension scheme before 6 April 2006 may be entitled to take their pension benefits from age 35.

All employees working in the UK and meeting certain criteria must by law be automatically enrolled into a workplace pension scheme, to which the employer and employee must contribute a combined minimum percentage (currently 5%) of qualifying earnings. All registered contract players playing for a club in the FA Premier League or the Football League are automatically enrolled into the Professional Footballers’ Pension Scheme. Earnings over £46,350 are not currently qualifying, and so the current basic annual contribution is just £5,208, but players may voluntarily contribute more.

There are many tax advantages to pension saving, including tax relief on pension contributions (up to an annual limit), tax free investment growth, and the ability to pass benefits free of inheritance tax on death. Significantly too, un-drawn UK pension assets are protected from creditors in the event of bankruptcy.


In Italy, social security law only covers professional athletes who are enrolled in a special scheme under the National Social Welfare Institution umbrella named the ‘Pension Fund for Professional Sports’ (the ‘FPLS’). The FPLS has different rules to those applicable to ordinary workers as, for example, it allows participants to retire at a younger age than other types of employees. The flip side of this is that fewer years of contributions means the pension will also ultimately be less. For amateur athletes there is no specific social security protection.

Under the general laws on professional sports, the Italian Football Federation (‘FIGC’) and the Italian players Association have established the indennità di fine carriera or ‘end-ofcareer allowance’ for players and coaches belonging to professional clubs affiliated to the FIGC. Participation in this contribution scheme is mandatory for player and coaches of affiliated clubs. The allowance is calculated based on the remuneration and bonuses received by the individual and payment begins at the time the individual ceases their professional sports activity.

The US

In the US, most professional sports leagues offer some retirement benefits to athletes. The NBA, NFL, and MLS all offer 401K plans, which allow players to contribute a portion of their income into an investment scheme for tax-deferred savings. Additionally, some leagues offer extended benefits to athletes based on service time in the league. For instance, the NHL offers players access to pension benefits after one day of service time, while the NFL requires two to four years of service for players to receive access to certain benefits. This type of requirement can be problematic considering the generally short duration of professional playing careers. The ultimate value of these defined benefits plans depends on the sports league, years of service in the league and the age at which the player begins accessing the benefits. Given these variables, the total amounts available upon retirement could range from $20,000 to $30,000 per year (for an athlete with a short career, who collects early (e.g., age 50) to up to $200,000 in certain leagues (for an athlete with 10+ years of service and who collected at age 62).

Irrespective of the country, the risk remains that once the athlete’s career has ended, they will find that the benefits they received are not sufficient to maintain the lifestyle that they have become accustomed to throughout their careers. Given this harsh reality other planning options, including financial education, are recommended, if not necessary.

Wealth planning, preservation and protection

Because of their life patterns, properly structured and run trusts can offer a number of benefits for high profile individuals, such as athletes, with complex and/or valuable asset holdings, who are seeking to move from direct ownership to a structure designed to offer a more coherent and ‘future proof’ ownership methodology. The benefits are in several areas such as asset protection, privacy, succession planning, security and coordination of ownership/risk segregation as well as tax efficiency. Most jurisdictions are party to the Hague Convention on the recognition of trusts and therefore, even though they might not know the trust concept in their domestic jurisdiction, they will be able to deal with it, both from a legal or a tax perspective.

Indeed, trusts provide an additional layer of protection against litigation claims from third parties, such as claims from governments and quasi-government authorities, matrimonial proceedings and forced heirship claims and business partners. The use of trusts may also help maintain the individual’s privacy: the transfer of legal title to key assets to a trust vehicle will by definition frustrate any enquiries as to the extent and nature of someone’s assets and how they are held.

Depending on where the athlete may be resident for tax purposes, a trust properly set up and managed in a reputable offshore jurisdiction may also offer an element of legitimate tax savings. More importantly, by ring-fencing assets in self-contained fiduciary structures such trusts, athletes can protect their wealth (or at least part of it) from themselves and their unsound business decisions.

The key for success is however to receive proper advice from the outset as trust structures work only if they are properly understood and implemented. Athletes will have to understand that the most important feature of a trust is the fact that legal ownership of the trust property is transferred to the trustees. It is from this transfer of legal ownership that many of the benefits mentioned above (such as risk segregation and privacy) arise. The level of this control is a delicate balance, as if it is too high, this would undermine the validity of the trust and negate the benefits that stem from the fact that the trustees legally own the trust property.

Protection on divorce and separation

Entering into a nuptial agreement - either a prenuptial (before the marriage) or postnuptial (during the marriage) - is one way in which an athlete can seek to protect wealth and reduce conflict should the relationship break down in the future. Often, the primary purpose of such an agreement is to make it clear that certain property and assets (capital, income and investments, sponsorship contracts etc) should be protected from claims on divorce.

Nuptial agreements are legally binding in many states in the US and some European countries (although the position is complicated, for example, in Italy and France given pre-existing marital property regimes). Whilst prenups and postnups are not legally binding in the English courts, they are often highly influential and may be upheld if certain criteria are met.

A nuptial agreement may allow an athlete to address much of the uncertainty as to the outcome of divorce, as well as the location and the law which will apply. This will be of particular relevance to the international athlete. However, entering into a nuptial agreement in one country will not automatically mean that its terms will be recognised and enforced in another. Specialist advice is needed before an agreement is signed, to ensure it will be as effective as possible. For unmarried couples, a cohabitation agreement is a useful tool and can be used to protect property (such as the home an athlete lives in with a partner) from claims on relationship breakdown.

Winning advisers

As part of their plan for the future, athletes should engage the services of a law firm with the ability to offer tailored advice on the precise needs of athletes. Ultimately there is no ‘one size fits all’ solution. It is essential to consider not simply the nature of the athlete’s income and assets, but also understand their personal and family situation, and, perhaps most importantly, the intention and objectives of the athlete in question.

There are significant risks in entrusting generalist counsel with this task, as they will lack the knowledge to advise effectively on the full range of potential issues. Often avarice or inexperience will prompt the athlete to ‘save’ on legal fees by seeking limited advice, but this is a short-sighted choice and, usually, the wrong one to make.

By choosing a firm experienced in dealing with the nuances of sports and with highly rated wealth planning and tax, family, commercial and employment practice areas, the athlete will be able to assemble a bespoke team of trusted advisors to assist on his/her precise needs. Furthermore, entrusting a firm in this way means they are in a position to provide informed guidance and assist relationships with consultants, managers and business partners. In doing so, the law firm will ensure that the athlete is able to formulate a cohesive, effective and tailored strategy for the future.

[1] Kim Carlson, Joshua Kim, Anamaria Lusardi and Colin F Camerer – ‘Bankruptcy Rates among NFL Players with Short-Lived Income Spikes’ - American Economic Review (Vol 105: 5) (May 2015).


[3] Office for National Statistics, Club Vita

[4] Athletes are said to divorce at higher rates than members of the general public, with the New York Times estimating (in 2009) that as many as 60% - 80% of NFL player’s marriages fail.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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