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Pro athlete creates trust to insulate his wealth from himself

A director of a sports marketing firm calls it "a very progressive move."

The president of a company that provides information on wealthy persons is not so sure of that assessment, saying that "it's not apparent what his goal is."

What both are addressing is the recent move of a young professional basketball player, Michael Carter-Williams, a veritable youngster at 22 who has just made a media splash by parking a portion of his large salary into a trust.

Carter-Williams was drafted high by the NBA this year and received a guaranteed salary of $4.5 million from the Philadelphia 76ers for his first two professional seasons. While some people are lauding his self-discipline in distancing himself from some of his instant wealth, others are questioning whether a trust is the proper vehicle.

After all, notes one commentator, trusts are often created by an older individual or couple with family members and used to pass along wealth in a controlled way to heirs. One tax expert calls Carter-Williams’ move “unusual” because his mother helped set up the trust and will play an active role in managing his money.

“Once you’re no longer a minor,” she says, “it’s difficult for your parents to control your wealth.”

What most people with a view on the matter are united in stating is that Carter-Williams is showing a high level of astuteness and wisdom for someone of his age and status. He is a young person suddenly coming into great wealth who has a short shelf life as a professional athlete, and stories of persons with similar biographies have often ended up with sour endings.

In fact, it has been estimated that about 60 percent of NBA players declare bankruptcy within five years of retiring, notwithstanding their often staggeringly high initial contracts. Reportedly, that number stands at nearly 80 percent for pro football players within a handful of years after they hang up their cleats.

Given such numbers, Carter- Williams might end up looking like an absolute genius.

At the very least, his story highlights the strong need for even young people to engage in sound estate planning.

Source: ABC News, "Philadelphia 76ers rookie puts salary in trust: a smart choice?" Susanna Kim, Dec. 3, 2013

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