Professional sports provide some athletes with the opportunity to earn substantial wealth at a young age. However, the average athletic career is notoriously short, and every athlete is always one major injury away from early retirement. Once in retirement, few athletes can match the high earnings of their playing days. Many post-career athletes wonder, “Where did all the money go?” To guard against the misfortune of a missing fortune, athletes need trustworthy financial advice. However, a solid prenuptial agreement is another essential tool for preserving an athlete's wealth. One essential tool for preserving an athlete’s wealth is a solid prenuptial agreement.
Divorce and the Professional Athlete
Divorce rates in the United States are generally high. Pro athletes face specific challenges when it comes to keeping a marriage intact. These include:
- Dealing with fame — Life in the spotlight, especially in this age of social media, can distort a person's self-image. Fame can be addictive. How each spouse deals with being a public figure, facing the cheers and the boos has a huge impact on the durability of the marital relationship.
- Temptations on the road — Athletes frequently travel for competitions and often encounter enthusiastic fans eager to connect. On the road, fidelity to a spouse can be greatly tested.
- Maintaining a relationship on a demanding schedule — Pro sports seasons are long, and many athletes do not live in the areas where they train or play. This time away from the family can lead to rifts with spouses and emotional distance from children.
- Life when the cheering stops — On the one hand, retiring athletes can spend more time with their families. On the other hand, life as “a civilian couple” takes adjusting. The spouses got married to fanfare, and either one could decide that an ordinary domestic existence wasn’t what they signed up for.
Many couples can overcome these challenges, but others find that without the glamour of the athlete’s career, there’s not much keeping them together. To protect against substantial losses in divorce, athletes must put together a detailed prenuptial agreement designed to address their specific concerns.
Crafting the Pro Athlete’s Prenuptial Agreement
A prenuptial agreement is a legally binding contract that couples execute before marriage. It typically outlines the division of assets and financial responsibilities in the event of a divorce. For professional athletes, a prenup addresses financial matters and ensures that their careers, reputations, and future incomes remain protected.
A pro athlete’s prenuptial agreement should contain these key elements:
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Separate vs. marital property — Generally speaking, parties to divorce keep their separate property and divide their marital property. Depending on the state, marital property gets divided 50-50 (community property) or in a way that is fair, but not necessarily equal (equitable distribution). So, the more property a spouse can designate as separate, the more they get to keep. Separate property consists of assets accumulated prior to marriage and assets acquired during the marriage via separate property. Often, an athlete will accumulate substantial wealth before marriage, such as signing bonuses, endorsement deals, and previous career earnings. A well-structured prenup ensures that these pre-marital assets remain the athlete's separate property, even if the marriage ends. Moreover, the athlete must maintain the separate nature of those assets, so that whatever growth accumulates is also separate property.
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Future earnings and endorsements — Earnings acquired during marriage are typically considered marital property and are subject to division between spouses. However, couples with two careers often negotiate to keep their earnings separate throughout the marriage. For instance, Tom Brady accumulated significant wealth as an NFL quarterback, estimated at $333 million. Meanwhile, his wife, supermodel Gisele Bündchen, had a net worth of $400 million at that time. The couple could have faced lengthy legal battles over their commingled assets. However, they reportedly had an “iron-clad prenup” that allowed them to finalize a swift divorce.
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Nondisclosure agreement — An athlete’s potential revenue through endorsements and media deals depends on their public image. Any airing of dirty laundry can damage an athlete’s earnings. The prenup should include incentives to protect the couple’s privacy and penalties for disclosing intimate secrets or maligning the athlete.
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Spousal support — Spousal support or alimony is a crucial aspect of a prenuptial agreement. Traditionally, courts have preferred that dependent spouses maintain the standard of living they would have had if the marriage had continued. This is particularly true when children are involved. This can require the supporting spouse to pay significant amounts, even leading to financial hardship. However, today, courts are cautious about granting permanent alimony to spouses who could become self-sufficient. This gives current athletes some leverage to negotiate alimony agreements that are not excessive.
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Division of retirement accounts and pension funds — Retirement accounts, pensions, and any long-term financial assets are important considerations for athletes. An athlete's pension, especially in leagues like the NFL or the NBA, can be substantial. A prenup should address how these assets will be divided if the marriage ends. Much could depend on the overlap between the player’s career and the marriage.
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Intellectual property and personal brands — Many athletes build personal brands and businesses outside their sport. Intellectual property, such as trademarks, logos, and businesses associated with an athlete’s name or likeness, can be highly valuable. A prenup should address ownership of these intellectual property rights and how they will be divided in the event of a divorce.
A prime example of an athlete entrepreneur is former NBA star Michael Jordan, who became a billionaire through various business ventures, including his iconic Air Jordan brand with Nike. In 2002, Jordan finalized a costly divorce, reportedly paying his ex-wife $168 million to settle their 17-year marriage. Observers speculate that his marriage to his second wife, Yvette Prieto, in 2013 likely included a substantial prenup.
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Protection from future debt and liabilities — Professional athletes can accumulate significant liabilities from loans, business investments gone awry, or unpaid taxes. A prenup can outline that any debts incurred before or during the marriage will be the responsibility of the individual who took them on. This clause can safeguard either spouse from liability for those debts in the event of a divorce.
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Provisions for children from previous relationships — For athletes who have children from previous relationships, the prenup may also include provisions related to child support, custody, and visitation rights. These provisions ensure that the athlete’s obligations to those children are clear and prioritized, regardless of the status of their current marriage.
Protect Your Legacy—Secure Your Future
These days, more young athletes are getting the message that their peak earning years are few, and they’ve got to exercise financial responsibility. Their financial advisers can point to a lengthy list of high-earning athletes who experienced financial trouble after their playing days and never recovered. Divorce is often a source of financial hardship, and a well-craft prenuptial agreement is always helpful.
A well-structured prenuptial agreement is an essential safeguard for professional athletes looking to protect their hard-earned wealth. At Bikel Rosenthal & Schanfield, we specialize in crafting agreements tailored to the unique financial and complex personal circumstances of high-net-worth individuals. Whether entering marriage or considering your options, our attorneys can help you safeguard your assets, future earnings, and personal brand. Contact us today at 212.682.6222 or online for a confidential consultation and take the first step toward securing your financial future.