Safeguard your privacy as you build your celebrity
For Sports and Entertainment professionals, fame and the privacy of your financial matters can co-exist.
As a professional athlete or entertainer, you are virtually guaranteed to be in the spotlight. In fact, you probably maintain a certain level of social media presence to help build your professional "brand." However, that doesn't mean you want your private business and financial affairs available for anyone to see.
“There are several steps that can be taken to protect one’s privacy when it comes to financial matters.”
“There are several steps that can be taken to protect one’s privacy when it comes to financial matters,” says Michael Duffy, Managing Director, Wealth Strategist with Merrill's Strategic Wealth Advisory Group, Head of Art Planning for Merrill. “We work extensively with Sports and Entertainment professionals, and we understand that too much information, or the wrong kind of information, can lead to scandal, financial and/or reputational harm.”
Duffy points out that there are several layers of privacy protection that can be pursued in two key areas:
- Ensuring those close to you respect your privacy desires.
- Shielding your identity in financial transactions.
Guarding against privacy leaks by those in your close circle
Duffy says that before embarking on more formal mechanisms, privacy likely begins at home. He encourages sports and entertainment professionals to set clear rules for family members (including spouses, partners, parents, siblings, children, cousins) and friends about what can be shared with the public.
You probably also employ individuals to assist with a wide range of your personal business. Managers, accountants, doctors and other professionals in that vein come first to mind. Fortunately, your dealings with these specialists are already bound by professional expectations, perhaps even requirements, of confidentiality. Violations can be cause for serious censure, even loss of their right to practice.
“Whether and how to develop a prenuptial agreement is a complex and often emotional topic. We explore the wide range of approaches to help ensure success in our whitepapers, Taking the taboo out of money and ‘I do’ and Tying a better knot. Please contact a Merrill advisor who would be happy to discuss them.”
However, you may have contracted with a broader list of individuals who are not already governed by such requirements. These can include architects, stylists, personal assistants, bodyguards, personal trainers, pilots, house managers and even boyfriends/girlfriends.
“Anyone in your ‘personal information orbit,’ especially if they are your employee or an independent contractor, may have occasion to disclose personal information about you, whether intentionally or inadvertently,” says Duffy. “It may be worth considering whether the use of a non-disclosure agreement (‘NDA’) makes sense in these situations.”
An NDA is a legally binding contract between two parties that expressly defines what information is not to be disclosed. It carries with it specific provisions for legal relief if the terms are violated.
In a similar but far more personal vein, prenuptial agreements (“prenups”) may have a role to play here as well. A prenup is a legal contract entered into before marriage that is used primarily to set out financial and property arrangements in the event of a divorce. In the case of privacy protection, a prenup can contain provisions that require both divorcing spouses to keep the terms of the divorce or legal separation private, and to prevent them from being shared with anyone after the divorce.
Ensuring your business remains your business
“Anyone in your ‘personal information orbit,’ especially if they are your employee or an independent contractor, may have occasion to disclose personal information about you, whether intentionally or inadvertently.”
A key issue for many public figures is protecting their financial transactions from public disclosure. If you buy a house, a car, a boat, a plane or any other physical property, you may not want your name attached to that transaction in public records, where it can be found by prying eyes.
“When faced with the desire to shield their identity from public exposure in transactions like these, I encourage clients to consider setting up a legal entity that can do the buying, while enabling the entity owners to remain anonymous in public filings,” advises Duffy. A limited liability company (an “LLC”) is one such entity that is relatively common and easy to set up. To benefit fully from the use of the LLC, this entity should also be used to purchase all the property and casualty insurance on these types of properties and be the payee on the policies.
Duffy cautions that this approach may not work for all situations as only certain states offer this protection as of this writing. Those are: Alabama, Colorado, Delaware, Georgia, Iowa, Missouri, New Mexico, Ohio, Virginia and Wyoming. An LLC formed in another state does not offer protection against disclosing the names of the stakeholders, officers and directors in public filings. “I encourage clients to evaluate any of these strategies with their Merrill advisor and other specialists to assess what works best for their needs,” notes Duffy.
|Set clear rules for family members||Consider using a non-disclosure agreement ("NDA")||Prenuptial agreements (“prenups”) may have a role to play|
|Set up a legal entity for buying in order to remain anonymous in public filings||Use a P.O. box or trusted third party for packages and regular mail||Use secure electronic delivery of financial documents|
Another source of privacy risk comes from monitoring or stealing your mail, packages and email, and the personal information they contain. At a minimum, you can use a P.O. box for all subscription services and regular mail. Your mail and packages can also be sent to a trusted third-party, like an accountant or business manager. Many financial services providers — from credit cards and insurers to financial advisers and banks — offer secure electronic delivery of financial documents.
For many of our clients, giving back through charitable giving is important. There are many approaches to philanthropy, from volunteering and direct donations to various charitable trusts and private foundations. There is an array of specific client considerations that dictate which approaches are best suited to achieving each client’s charitable goals. However, if a priority is having charitable impact with the greatest identify protection, then you may want to consider a Donor Advised Fund (“DAF”).
Merrill clients benefit from the extensive efforts, tools and procedures that Bank of America’s Global Information Security team has instituted to protect client information, and proprietary and confidential data. Of particular concern these days is cyber criminals’ efforts to steal online identities. Please review our checklist for Keeping your personal information safe online and more about the security efforts we have taken at our Privacy & Security Center.
Giving back can take many forms
|Unstructured, less complex, less control
Formalized, more complex, more control
Wide range of roles and responsibilities, including board member, fundraiser and volunteer
Flexible time commitments
|Direct Donations to Charity||
Immediate financial support to charities
Typically tax-deductible in current year, subject to certain limitations
Tax-deductible irrevocable contributions made to your personal giving vehicle
Grants distributed to charities from this personal giving vehicle over time based on your recommendations
|Charitable Remainder Trusts||
Provides regular payments to you or your loved ones (may be for life or an established term of years)
Charitable beneficiary receives remainder at end of trust term
Particularly attractive if you have assets that have a low tax basis
Sale of appreciated assets by the trust does not trigger capital gains tax at the time of the sale
|Charitable Lead Trusts||
Provides payments to charity for a specified term of years without relinquishing assets
Particularly attractive if you currently make recurring annual charitable contributions
Allows you to transfer appreciating property to your loved ones at a reduced valuation for gift and estate tax purposes
Private nonprofit dedicated to your giving
Full control over grant-making and investment management
Room for family engagement at all levels
Subject to annual minimum distribution and reporting requirements
According to Donald J. Greene, Managing Director and National Donor-Advised Fund Executive, Bank of America Private Bank, a DAF offers some very compelling advantages over a private foundation when it comes to anonymity. “A private foundation must file an annual return with the IRS,” notes Greene. “It discloses the names of the officers and directors, their salaries (if any), and details of its charitable distributions, such as what amounts were given to which recipients. These tax returns are readily accessible through various subscription websites.”
For a more robust comparison of DAFs and Private Foundations, please see our article here and ask a Merrill advisor about the Bank of America Charitable Gift Fund. The approach to charitable giving that is best suited to one’s goals is a topic that warrants a more complete assessment. A Merrill advisor can help you think about the options.
“Many of our high-profile clients use our Bank of America Charitable Gift Fund to support all their favorite causes and charities.”
National Donor-Advised Fund Executive at Bank of America Private Bank
With a DAF, individual donors make no such filings, so your giving remains private. “Many of our high-profile clients use our Bank of America Charitable Gift Fund to support all their favorite causes and charities,” says Greene. The DAF enables the donor to choose whether to remain anonymous or have their gift acknowledged with each grant. What’s more, DAFs are flexible enough to use illiquid assets to make charitable gifts, as we discuss in How to integrate complex assets into your giving strategy.
Put the team in place to help you navigate these decisions
As a sports or entertainment professional, you are your own “business enterprise.” Like the leader of any successful company, you need to delegate critical tasks to trusted individuals so that you can concentrate on what you do best. You will likely need individuals with specialized skills, licenses and experience.
Merrill financial advisors are accustomed to working with our clients’ teams of professional advisors, which typically include accountants, trust and estate lawyers, life insurance specialists, property and casualty insurance specialists, and business managers. This team can assist you in evaluating and, if appropriate, enacting several of these strategies and monitoring them.
“I’m part of the Strategic Wealth Advisory Group at Merrill, which exists solely to support our Merrill financial advisors and their clients as they explore ideas like these,” notes Duffy. “Unlike many other professional services providers, the services of the Strategic Wealth Advisory Group and our written insights are offered to clients without charge. That helps ensure we have no vested interest in the solution chosen.”
Protecting your privacy is possible with some thoughtful steps and solid planning. Your Merrill advisor can work alongside other members of your team of trusted specialists to help you determine the optimal approaches for your goals and to manage them efficiently over time.
Merrill offers comprehensive services with an understanding of the unique positions of men and women in the sports industry:
|Preserve income and assets — thoughtful planning and insurance solutions that can help protect the things you care most about — your family, business and assets|
|Personalized investment strategies that can help address unpredictable and/or large sporadic income streams|
|Tax minimization strategies|
|Manage everyday cash and access liquidity — help with planning for your income and cash flow needs, including expense management and budgeting|
|Help figuring out multiple income streams, compensation for use of name, image and likeness, early in career — even while in college|
|Access to Bank of America loans and mortgages — realize borrowing power to fund your needs, from buying a first home to funding unexpected opportunities (i.e., vacation home, securities-based lending, customized lending, custom mortgages)|
|Plan for a fulfilling retirement and help with understanding league-sponsored pension plan characteristics and league-specific 401(k) benefits|
|Give back to loved ones and community — our Private Wealth Services group will work with you to help you determine the legacy you want to create for yourself, your family and chosen causes|
|To continue the conversation, reach out to your advisor.|