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3 Game-Changing Financial Tips for Student Athletes Scoring NIL Deals

Executive Summary:

Name, image, and likeness (NIL) deals offer athletes exciting opportunities, but also potential pitfalls if not approached strategically.
Athletes should educate themselves on taxes, carefully review contracts, and budget with long-term security in mind.
With guidance on financial obligations, agreements, and smart money management, athletes can maximize NIL benefits while safeguarding their futures.

You are a talented young athlete with a growing public profile. You’ve just been offered a Name, Image, and Likeness (NIL) deal, an opportunity that can put some extra money in your pocket or even, in some cases, make a more profound impact on your financial life. It’s an exhilarating time, but it’s also crucial to approach this new chapter with the right knowledge and mindset.

New Division I NIL Disclosure and Assistance Rules

The Division I Board of Directors recently made some notable updates to its NIL rules, which went into effect on August 1, 2024. Key changes include:

Increased NIL assistance: Schools are now permitted to assist student-athletes in identifying NIL opportunities and facilitating deals with third parties, provided the athlete discloses their NIL arrangements. While schools can help, student-athletes maintain full control over the terms of their agreements.
Expanded disclosure requirements: To receive NIL-related support from their school, student-athletes must disclose any NIL agreement valued at $600 or more within 30 days of signing the contract. This applies to both current and prospective student-athletes.
New NIL reporting platform: The NCAA has launched NIL Assist, a mobile-friendly platform that streamlines NIL disclosure, provides educational resources, and allows student-athletes to review service providers.
Post-eligibility insurance: The NCAA has also introduced post-eligibility insurance for all divisions, covering injuries sustained during participation in college athletics for up to two years after graduation. This includes up to $25,000 for mental health services.

These changes are designed to provide student-athletes with increased NIL-related support and flexibility while maintaining fairness and clarity in the ever-evolving NIL landscape.

Three Essential Financial “Plays” Every NIL Athlete Needs to Know

Whether you’re a college or high-school athlete, or the trusted advisor to a young athlete, here are three critical actions you should take to avoid common financial pitfalls associated with NIL deals.

1. Recognize Your Tax Obligation

One of the first hurdles you’ll encounter in the world of NIL deals is taxes. It’s essential to understand that the money you earn from these deals is subject to taxation. Many young athletes overlook this, often because they’ve never had to deal with taxes before.

To avoid potential financial trouble down the road, consider these steps:

Educate Yourself: Young athletes receiving payments from NIL deals are responsible for paying taxes on that income just like professional athletes. Take the time to learn about taxes, especially how they apply to your earnings. Understanding the basics of taxation will empower you to make informed decisions.
Consult a Tax Professional: Before signing any NIL agreement, consult with an experienced accountant, tax advisor, or business manager. They can help you calculate your tax obligations, identify potential deductions, and develop a tax strategy tailored to your situation. Along with ensuring any federal, state, and local taxes you owe are paid on time (avoiding penalties), a tax professional can also help you navigate more complex situations – such as earning income across multiple states.
Practice Smart Spending: Resist the urge to splurge on electronics, clothes, or cars as soon as the money starts rolling in. Create a budget that considers your future tax payments, living expenses, and financial goals. Staying disciplined with your spending is key to long-term financial success.

2. Execute Agreements Cautiously

Navigating NIL deals can be tricky. There are various state laws and school policies to consider, along with a number of legal “gotchas” to avoid. Here’s how you can safeguard your interests:

Seek Legal Advice: Before signing any NIL agreement, engage a lawyer with experience negotiating NIL and brand endorsements for athletes. An attorney with expertise in sports contracts can help you navigate the important terms in an NIL deal, such as money, exclusivity, length of the agreement, how the brand can use your name, image, and likeness, and an athlete’s delivery requirements. An experienced attorney will help you spot potential pitfalls and ensure the agreement aligns with your long-term goals.
Beware of “Standard” or Simplistic Agreements: When someone refers to a contract as “standard” or provides an overly simplified agreement, that should throw up a red flag. All it takes is the slightest language in your agreement to give a company unfettered rights to use your name, likeness and image in ways you never intended.
Follow Regulations: An experienced advisor will help you navigate specific laws and policies set by your state, school, and the NCAA regarding NIL deals. For example, you cannot share photos or videos in your team uniform with logos from other brands without first getting permission from your school or the brands.

3. Budget Wisely for the Long Term

While newfound wealth can be exhilarating, it’s crucial to manage your finances wisely:

Prioritize Needs Over Wants: When it comes to spending, prioritize essential needs over extravagant wants. Understand this financial windfall may be a one-time occurrence, so focus on building a secure future rather than indulging in immediate gratification.
Future-Proof Your Earnings: Instead of assuming this is a continuous stream of income, treat each deal as if it were your last. Create a budget that accounts for potential future earnings and uncertainties, ensuring you’re prepared for any scenario.
Explore Tax Mitigation Strategies: Consider tax mitigation strategies, such as retirement planning and deferral opportunities, to minimize your tax burden. Consulting a financial advisor can help you explore these options.

Make the Most of Your NIL Opportunities

The legalization of NIL in college and high school sports represents an exciting shift for young athletes. It can offer game-changing money, enabling you to take care of your financial needs, along with building your brand for future growth. But with great success also comes great responsibility. Even professional athletes who’ve reached the highest pinnacles of their respective sports can end up without the financial resources they need if they don’t plan ahead.

The good news is by recognizing the potential pitfalls and seeking professional guidance early in your NIL journey, you can better position yourself for long-term financial success. Remember, it’s not just about profiting from your name, image, and likeness today, but also securing your financial future for tomorrow.

How We Can Help:

Our Entertainment, Sports, and Media practice understands the unique challenges athletes face at all stages of their financial journey. Whether you need assistance with tax planning, contract negotiations, or financial strategy, we’re here to guide you toward a successful future in the world of sports and NIL.

This article was co-authored by Leron E. Rogers, Partner at Fox Rothschild LLP.

Charting Your Financial Path Beyond the Game

Key Takeaways:

Many professional athletes go on to achieve even greater financial success in their lives after sports through pro-active financial planning and capitalizing on post-career opportunities.
Having the right financial advisory team is crucial for transitioning athletes to make smart money decisions across areas like investments, business ventures, taxes, estate planning, and risk management.
With proper guidance, athletes can turn their playing careers into lifelong financial stability and growth through entrepreneurship, investments, and other lucrative second careers.

As a professional athlete, you’ve spent years honing your skills, building your career, and making a name for yourself. But what happens when the final whistle blows and your playing days are behind you?

The good news is many athletes move on to highly successful and lucrative ventures after their time in sports — some even making more money than they did during their athletic careers. With the right financial support and strategic planning, you can be one of them.

From Athlete to Entrepreneur: Maximizing Post-Career Opportunities

The transition to life after sports can be incredibly rewarding, opening doors to new and exciting opportunities. Many professional athletes have not only avoided the financial pitfalls often associated with post-career life but have also thrived financially.

Here are a few notable examples of athletes who’ve achieved significant financial success with their second careers:

Kenny Smith

Kenny “The Jet” Smith played 10 years in the National Basketball Association (NBA), winning back-to-back championships with the Houston Rockets in 1994 and 1995. While Smith made just under $12 million over his playing years, as an analyst on the Inside the NBA alongside Ernie Johnson, Charles Barkley, and Shaquille O’Neal, Smith reportedly takes home $16 million per year.

Maria Sharapova

While Sharapova earned over $300 million during a career where she became just the tenth woman to win all four major championships, she retired at the young age of 32 in 2020. Since that time, she has established herself as an investor and entrepreneur — working with health and wellness brands like Therabody and Tonal — while also serving on the board of directors for luxury fashion house Moncler Group.

Derek Jeter

Jeter played 20 seasons at shortstop for the New York Yankees, winning 5 World Series titles before retiring in 2014. After earning over $265 million in MLB salary, Jeter went on to found Jeter Publishing with Simon & Schuster and the media company The Players’ Tribune in 2014, which publishes first-person stories from athletes. From 2017, he became part-owner and CEO of the Miami Marlins.

David Beckham

Playing 21 seasons of professional soccer for teams like Manchester United, Real Madrid, the LA Galaxy, Beckham racked up league titles and millions in contract dollars. Retiring in 2013, he transitioned into a successful business career — starting the management company DB Ventures and collaborating with brands like HUGO BOSS. In 2018, Beckham brought Major League Soccer to Miami as co-owner of Inter Miami CF.

These examples demonstrate the wealth creation potential that exists long after an athletic career ends. Of course, it’s not just about what you do after your playing days are over; it’s also about what you do with your money.

The Role of Financial Advisors in Your Post-Career Success

The right financial advisors can help you navigate the complex financial landscape, assisting you to make smart decisions that will benefit you in the long term. Here are some key areas where advisors can support you:

Investment Planning

Post-career, it’s essential to make your money work for you. Financial advisors can help you develop a diversified investment portfolio tailored to your risk tolerance and long-term goals. This could include stocks, bonds, real estate, and business ventures.

Business Ventures

Many athletes transition into entrepreneurship. Advisors can provide invaluable support in evaluating business opportunities, developing business plans, and managing your ventures. Whether you’re interested in starting a restaurant, a retail chain, or a tech startup, having the right guidance can make all the difference.

Tax Planning

High earnings often come with complex tax obligations. A financial advisor can help you navigate these complexities, enabling you to take advantage of tax-saving opportunities and stay compliant with regulations.

Estate Planning

Protecting your wealth for future generations is crucial. Advisors can assist you in creating an estate plan that distributes your assets according to your wishes, minimizing tax liabilities and providing for your loved ones.

Retirement Planning

Even if you’re transitioning into a second career, planning for retirement is essential. Advisors can help you set up retirement accounts, plan for long-term care, and establish a steady income stream throughout your retirement years.

Risk Management

Life is unpredictable, and managing risk is a crucial part of any financial plan. Advisors can help you select the right insurance policies and develop strategies to protect your assets against unforeseen events.

Taking the Next Step in Your Post-Playing Journey

Transitioning from a professional athlete to a successful entrepreneur, broadcaster, coach, or executive is not just a dream; it’s a reality for many who have walked in your shoes. With strategic planning and the right financial support, you can turn your athletic success into lifelong financial stability and growth.

Remember, the game doesn’t end when you leave the field; it simply evolves. Embrace the opportunities ahead and put the right team in place to guide you through every step of your post-career journey.

How We Can Help

Our dedicated Entertainment, Sports, and Media team has extensive experience guiding professional athletes through all phases of their career journeys. We offer comprehensive financial services tailored to help you achieve continued success. Reach out to our team today to discuss how we can support your post-career goals.

5 Financial Pitfalls Athletes Can’t Afford to Ignore

Key Takeaways:

Athletes often face financial challenges despite lucrative careers due to mismanaging money or trusting the wrong people with their finances.
Common risks that threaten athletes’ wealth include entourages, unqualified gatekeepers, and financial short-sightedness.
Solutions to frequently seen financial pitfalls for pro athletes involve setting boundaries, seeking diverse advice, and adopting disciplined budgeting.

It’s an all-too-common story: A talented athlete makes it to the big leagues and scores a life-changing payday only to watch their wealth slip away.

In some cases, it’s the result of overspending or poor financial planning. In other cases — like we recently saw with Los Angeles Dodgers star Shohei Ohtani (you can read MGO Entertainment, Sports, and Media Industry Leader Tony Smalls‘ perspective on that situation in this ESPN article) — it’s trusting the wrong people with access to your finances.

The reason we see the same story play out time and again in the world of professional sports is simple: athletes aren’t trained to look out for red flags or be proactive about protecting their money.

But just as you would prepare for an opponent before a big game or match, you need to be aware of the potential financial pitfalls you may encounter as a professional athlete.

The Five Biggest Dangers to Athletes’ Wealth

The warning signs that an athlete’s wealth is about to take a turn for the worse are easy to spot – because it happens in predictable ways. Lack of experience and betrayals of trust are enough to take down all but the strongest financial foundations. The biggest keys are to understand it can happen to anyone, and take the simple steps to avoid these issues.

1. The Entourage

Friends from the neighborhood latch onto the athlete and live the celebrity life while being a persistent drain on finances and a source of bad ideas. The athlete has promised to “take them out of the neighborhood/poverty,” but forgets that before they can help anyone else, they need to put the oxygen mask on themselves first.

What to do instead: You can turn this potential risk into an asset. Take your crew out of the neighborhood but set them up to thrive. Whether through responsible small business loans, or education and career training, you can rise up together.

2. The Gatekeeper

Far too frequently, a long-time friend or family member lacking financial expertise assumes the role of “The Gatekeeper” for the athlete. This individual often makes ill-informed business choices and monopolizes access to the athlete, shielding their finances from scrutiny and preventing anyone from uncovering potential negative consequences.

What to do instead: Instead of relying on a single gatekeeper, assemble a roundtable of advisors AND meet with them together, as often as you can. Especially as significant financial decisions are being made. Carefully evaluate those you entrust with financial matters, considering both their motivations and competency in making sound financial decisions. If either aspect is lacking, guide them toward improvement or seek out individuals with the necessary qualifications and integrity.

3. The Tantrum

When finally rewarded for the work and discipline required to become a pro, many athletes go through a phase of feeling they deserve anything and everything. When advised not to buy luxury items such as jewelry or cars, the response often is “who the hell are you to tell me what I can or cannot buy!?” Increasingly disastrous financial decisions inevitably follow.

What to do instead: This one is on you. No one will ever truly understand what you’ve endured to achieve success, but you also have to keep one foot on the ground and understand how quickly you could lose everything you’ve worked for. The best path forward is to implement a budget with room to enjoy what you’ve earned that also has controls in place to ensure you’re building an unshakeable foundation for the future.

4. The YES Men

When someone in the athlete’s camp gets fired for not agreeing with a bad decision, the professionals hired to protect their client (like the agent, business manager, or lawyer) may mitigate any conflict with the athlete to avoid getting fired — becoming YES Men. They would rather ride out the impending financial storm rather than tell the athlete what he or she actually needs to hear. Once there are only YES men around, the end is almost certainly near.

What to do instead: Understand how getting different points of view on financial matters helps avoid financial hazards. Get into the habit of asking your team: “What could go wrong with this financial move?” The final decision is always yours, but there is tremendous value in advisors who feel confident sharing financial knowledge and experience, even when you don’t want to hear what you need to hear.

5. Financial Myopia

Athletes can have a defective vision of their financial future. The average career span in the NFL is 3.3 years. In the NBA, it’s 4.5 years. The NHL is 5 years. And MLB is 5.6 years. Sure, pro players may earn a lot of money. But after paying agent’s fees, taxes, and shelling out for a luxury lifestyle, there isn’t much left to support the non-playing years. Some athletes may think they can pull off another miracle in overcoming all odds to maintain their lavish lifestyle, but the most common result is a broke athlete.

What to do instead: Budgeting and planning are the keys here. Just remember it isn’t a “one or the other” situation. With the right mindset and approach, you can still live (relatively) large, while putting away enough to secure a future for yourself and your family. It just takes some self-control and a willingness to make the right decisions.

Overcoming Financial Obstacles by Building a Winning Team

Many athletes come into a level of money at a young age that no one is truly prepared to handle. Lack of experience and betrayals of trust are enough to take down even the strongest financial foundations. This is why it is essential to choose a winning financial team.

Too often, athletes split responsibilities between team members (frequently friends and family members), allowing them to operate in silos without any oversight. This sets the stage for financial trouble down the line. Instead, you need to build a team of professionals who work together, so you always have a system of checks and balances in place.

Remember, true baller status comes when an athlete can live like a king for a lifetime, not just a couple years. When you build a trusted team, establish a plan, and follow it through, you can live comfortably long after your playing days are over.

How we can help:

With more than 30 years of experience working with athletes, actors, and music artists, our dedicated Entertainment, Sports, and Media team understands the unique financial challenges you face. Our team will help you build a financial foundation to achieve your goals both now and in the future. Reach out to us today to learn more.

Top Strategies to Help Your Entertainment, Sports, and Media Clients Manage Global Income and Taxes

Executive Summary:

Agents and managers can help globally earning clients like professional athletes, musical artists, and entertainers strategically manage finances and taxes across borders to maximize earnings.
For U.S. citizens and residents earning money abroad, key areas for advisors to address include endorsement deals, royalties, foreign properties, foreign tax returns, and tax structuring that considers foreign investments.
For foreign (non-resident) athletes, artists, and entertainers performing in the U.S., considerations include but are not limited to U.S. taxable income, withholding rules, tax status, Central Withholding Agreements (CWA), and tax treaties.

As an agent or manager for athletes, artists, and entertainers, many of your clients likely earn income across borders as they perform worldwide. Strategically managing their finances and taxes is crucial to maximize earnings. Proper planning can help reduce tax burdens and avoid double taxation across jurisdictions. This allows your clients to focus on their careers while you may finesse your assistance to them in optimizing their income with guidance from tax professionals.

Understanding key tax considerations can enable you to put frameworks in place to mitigate your clients’ liabilities. For clients who are citizens or residents of the United States earning money abroad, all worldwide income must be reported to the IRS. However, foreign countries also tax income earned by non-residents. Assessing relevant tax treaties and structuring contracts in an appropriate manner can lead to more advantageous tax treatment.

When your clients have income from various sources both from inside and outside the United States, proactive tax planning is key. Common international income types to consider include:

Salaries from foreign leagues and tournaments
Performance fees from concerts and festivals
Royalties
Endorsements and sponsorships
Bonuses and prizes from international tournaments
Merchandise sales
Other income earned while playing or performing overseas

How these income types are classified and sourced impacts tax liabilities. Consulting tax professionals before your clients sign any deals allows for upfront planning that can keep more money in your clients’ pockets.

5 Key Considerations for U.S.-Based Athletes, Artists, and Entertainers Earning Income Abroad

If you are an advisor to musical artists, professional athletes, film actors, or other performers who are U.S. citizens, residents, or green card holders with foreign income sources, here are five important areas to address:

Endorsement Deals – How will the construction of a contract impact tax treatment abroad? Will the income be considered U.S. or foreign sourced? What are some ways to proactively plan for potential tax savings?

Royalties – Can royalties be classified differently if content is published while clients are abroad? How are royalties affected by collaborations with international artists? Is it considered U.S. income if royalties are received while playing or performing abroad?

Foreign Properties – What are the tax rules surrounding your clients purchasing or renting homes abroad (rules may vary by country)? Did you know that foreign rental income may need to be disclosed on a U.S. tax return? How do investments in foreign countries get reported and taxed?

Foreign Tax Returns – When is return filing required for extended stays abroad? Can foreign taxes be credited (and is the credit dollar-for-dollar)? What should be expected for payments received as a contractor versus as an employee? Which expenses are deductible in each country? For example, are agent fees, travel expenses, and entertainment deductible?

Foreign Tax Structuring – Is it better to withhold taxes on gross revenues or after deductible expenses? How do local, state, and regional (provincial, cantonal, district, county) taxes factor in?

With these areas addressed upfront, you can maximize income and minimize overall tax burdens for your clients as opportunities arise.

5 Top Considerations for Foreign Domiciled Athletes, Artists, and Entertainers Performing or Playing in the U.S.

If you are an advisor to athlete, artist, and entertainer clients who are not residents or citizens of the U.S. but earn income in this country, areas that could have an impact on your clients’ taxes include (but are not limited to):

U.S. Taxable Income – Is U.S.-sourced income taxable? What types of income may this include? Is there a requirement to file a U.S. federal income tax return? Is there an income threshold that must be met?

Withholding Rules – What are the withholding rules surrounding payments to foreign athletes, artists, and entertainers?

U.S. Tax Status – How is U.S. tax status determined — residency for income tax and domicile for transfer tax? How is taxation affected with or without a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)?

Central Withholding Agreements (CWAs) – A CWA is a tool that can help entertainers and athletes who don’t live in the U.S. by having U.S. income tax withheld based on the non-resident’s income. Is a CWA beneficial for the individual’s situation?

Tax Treaties – Does the individual’s home country have a tax treaty with the U.S.? How does it impact tax liabilities?

Evaluating options surrounding tax statuses, withholding approaches, and applicable treaties can mitigate liabilities and optimize tax treatment for your foreign clients.

Work with Tax Professionals to Help Your Clients Maximize Global Income

As an agent or manager navigating global income for your clients, working with experienced tax professionals is key. Advisors can assess your clients’ situations across jurisdictions to put frameworks in place reducing liabilities and avoiding double taxation. With the right global tax strategy tailored to each client, you can position them to pursue worldwide career opportunities with maximum income and minimum taxes.

Need help navigating the world of international tax for athletes, artists, and entertainers? We have experienced professionals dedicated to both international tax and entertainment, sports, and media (ESM) ready to answer all your questions. Reach out to our International Tax Team today.