NBA Rookie Takes $4.5 Million and Does Something No Basketball Player Ever Does
It really pays to listen to your mother. That what 22-year-old Philadelphia 76ers rookie Michael Carter-Williams will say in about three years when he can finally touch his $4.5 million signing guarantee. But for now, thanks to his mom, he can’t touch it.
The vast majority of pro-athletes have a habit of blowing all their cash after they retire. Almost 80% of NFL players file for bankruptcy within five years of retirement — 60% of basketball players go broke within the same time frame.
Carter-Williams’ mom, Mandy Carter-Zegarowski, doesn’t want her son, who she knows is putting his body on the line, to go through that. In a statement to ABC News, she explained why putting money away is a smart choice.
“Our goal is to work with Michael to manage his money in a way that will secure his long-term financial future … Right now, the focus is not only to save as much as possible, but also to use his unique position to serve as a role model and give back to the communities that continue to support him and his career.”
With his mom’s help, Carter-Williams’ money is stashed in a trust fund for three years which he will not be allowed to touch and spend on frivolous things. Lamborghinis do not, in fact, make basketball players better athletes. In the meantime, he will live off his endorsement deals with Nike and Panini trading cards.
The whole situation is unusual, but probably a smart move, says tax expert and attorney Kelly Phillips Erb.
“Even if an athlete has a million dollars today, it has to last until you’re 65.”
Erb also added that Carter-Williams will be 27 in five years, which is considered old for an athlete — unless you are Kobe Bryant of course, who might believe that 36 is the new 26.
“In professional sports in particular, you’re going to have health problems and your knees are going to go out … His parents are very smart to know he has a shelf life though they hope he’ll go on to good things. But they don’t want him to blow his money on a Lamborghini.”
Showing financial responsibility and discipline is crucial for young people who encounter huge amounts of cash. There are of course ups and downs to locking money in a trust.
In Carter-Williams’ case, he will be protected from creditors going after his assets with licensing and royalties lawsuits. However, if anything bad were to happen to his trustee (mom), knock on wood, a new trustee could be put in place — one that might not be so willing to give Carter-Williams access to his money, though that’s a worst-case scenario.
What’s the lesson here? If you are young and flush with cash, you’d be a fool to think that your top priority isn’t financial responsibility. Sometimes you also have to guard your money from yourself.
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