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Baseball’s $300 Million Players

Provided by Nicholas Wealth Management

May 24, 2021

Even ballplayers prepare for the future.


The San Diego Padres signed infielder Fernando Tatis, Jr., to a 14-year, $340 million contract roughly one year after the Los Angeles Dodgers inked outfielder Mookie Betts to a 12-year, $365 million deal. That brings the total to 8 baseball players who have signed long-term, $300+ million contracts.1


From an estate strategy perspective, you might be surprised to hear that these baseball stars may face similar issues as other Americans as they prepare for the future.2


To begin with, all 8 will need to understand that the estate and gift tax exemptions are $11.7 million per person. But those exemptions are set to expire and revert back to $5 million in 2026. While those current limits only address a fraction of their net worth, they can start to explore other choices for the balance.2


Remember, this letter is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your legal professional before modifying your estate strategy. Also, some estate strategies involve the use of trusts, which have a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.


All 8 also should consider who they should name as their health care decision-maker and financial power of attorney. They also may want to consider estate strategies that involve life insurance. All 8 are relatively young, which may work to their advantage as they consider the role life insurance can play.2


Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.


While these 8 and many other professional athletes have signed “generational” contracts, it’s not unlike windfalls generated when selling a business or compensation packages for key executives. Please let us know if there’s a big change in your financial situation. We’d welcome the chance to hear the story.





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Citations.

1. CBSSports.com, April 1, 2021

2. WealthManagement.com, April 21, 2021