30th Sep 2012
Vince Young has quite the college and professional football resume. A Rose Bowl victory and BCS championship with the Texas Longhorns and a Heisman Trophy resulted in Young becoming the third overall draft pick in the 2006 NFL draft. From there, Young earned approximately $26 million and three Pro Bowl appearances.
Today, Vince Young is broke. He is just another in the long line of professional athletes who appear to make more money than anyone could ever spend in a lifetime but end up penniless.
Young has filed a suit against his former agent and financial planner for misappropriating $5.5 million of his funds. Additionally, a lender is suing Young for a loan which Young claims benefited the agent and financial planner. Young’s attorney has stated that he was too young and allowed his advisors to have too much control over his money.
Athletes and celebrities who incur sudden wealth often fall victim to individuals from their pasts who have a business idea, want a loan or garner the earner’s sympathy, as well as new advisors who may not have the best intentions. Since athletes’ salaries are widely reported, these opportunistic individuals know exactly where to go to cash in.
However, if the earner is properly educated and advised, planning can protect him or her from not only these individuals, but from themselves as well.
If Young had been warned about the potential hazards of sudden wealth, he may have considered putting his earnings into an irrevocable trust for his own benefit. Several states allow for the settlement of Domestic Asset Protection Trusts or Self-Settled Spendthrift Trusts. Upon establishing this type of irrevocable trust, a trustee would have been appointed to make distributions from the trust assets to benefit Young, as well as his wife and descendants, if he so chose. Any requests for withdrawal would have had to be approved by the trustee after he or she determined whether the distribution was in Young’s best interest. Of course, by making such a responsible decision, Young would have surrendered significant control over his earnings. However, it is likely that he would not have been broke today.
In addition to protecting Young from his own poor decisions, such planning would have protected Young’s earnings from his creditors and also provided for the distribution of the remaining trust assets to his beneficiaries at death in a private manner without having to go through the probate process.
Such planning is not just for superstar athletes. Spendthrift provisions and trusts can be utilized by anyone for him or herself or for a beneficiary. Additional asset protection techniques, such as a Limited Liability Company (LLC), a Beneficiary Defective Irrevocable Trust (BDIT) and an Irrevocable Life Insurance Trust (ILIT), as well as more common estate planning with a Revocable Living Trust, can also be utilized by athletes and others with the potential for significant earnings in a short period of time.