Structured NIL Annuities
Defer taxes. Maximize the deal. Secure your financial future!
The landscape of amateur athletics changed forever on June 21, 2021, with the unanimous decision of the US Supreme Court in the NCAA v. Alston et al. matter.
This ruling paved the way for amateur athletes to earn payment to promote, partner, or represent companies and/or brands by using their name, image, or likeness (NIL). As a result, colleges and universities nationwide have been hustling to develop channels for student-athletes to safely and securely enter into NIL contracts. These contracts must meet the specific guidelines established by the NCAA, the College or University the student attends, and the State within which they attend school.
Most universities have coordinated efforts through their athletic departments and or partnered with school-specific “Collectives,” who pool donations and resources from various Athletic Booster groups and companies to help create unique NIL opportunities for student-athletes at their respective schools.
As can be anticipated, however, much confusion and frustration exists between athletes, coaches, and universities regarding the best way to manage the NIL process. While NIL contracts can benefit student-athletes by providing or supplementing the money on which they live, most agree that it is equally important to train these student athletes in proper financial management. Many students or college-athletes have never held a job, paid taxes, created a budget, or looked at ways by which they can plan for their future needs beyond college or their days on the field of play.
In fact, many student-athletes will never play their given sport professionally, and a NIL contract can be their one opportunity to establish guaranteed future revenue, capitalize on their good name and talent, and hedge against the potential of future injury, which may eliminate their ability to participate in further NIL opportunities.
While in theory, giving a college-aged student a large sum of money might seem entirely beneficial, a structured NIL annuity provides the student-athlete with guaranteed future income – for the long term – ensuring their financial portfolio for decades to come.
What is “NIL”?
Enter the Structured NIL Agreement
Following IRC Section 409(a) guidelines, student athletes, participating in NIL contracts, can now defer their tax obligations, maximize the yield of their NIL contract and secure their financial future through the placement of a Structured NIL Agreement (SNILA).
By placing any portion of their contract payments into an annuity solution, student athletes can defer their immediate tax obligations on the portion placed into investment, paying a deferred obligation in the future year(s) when annuity payment is received.
Best of all, the student athlete can design a future payment plan tailored to their unique needs, with payments over a defined period of time, or over the course of their lifetime. The option to identify future lump sum payment dates is also available, allowing the student athlete to plan for landmark future events, like getting married, buying a home, starting a business or family, or even retirement.
With no investment minimums or maximums and the ability to defer first payment up to 40 years if so desired, the Structured NIL Agreement is a fantastic way to manage taxes, learn fiscal responsibility and establish a well-funded financial future
How does the Structured NIL Agreement (SNILA) benefit the process?
Just like the field of play, competition for NIL opportunities and dollars is significant. Potential corporate partners have limited resources and want the best return on investment they can secure. Likewise, Collectives have to look to spread the wealth across the entire student athlete population in an attempt to preserve team cohesiveness and balance.
The ability to maximize deals through SNILA allows both entities the opportunity to significantly stretch their allocated dollars and, ultimately, partner with more athletes than they had originally targeted. As a result, the corporate partners have a larger pool of student athlete ambassadors to market their company and products while the athletes have the power to multiply their income and preserve their financial future.
Here is how the investment works:
Independent Life Insurance Company, in partnership with Franklin Templeton Advisors and Bank of America, has created the iStructure Index Linked Annuity. Powered by the Franklin BofA Global Index, the iStructure annuity offers a guaranteed payment floor, designed to provide a guaranteed return of investment to the student-athlete. The iStructure annuity can yield uncapped growth potential over future years, based on the market performance of the index.
In years where there is no growth in the Index, the floor payment will remain the same for the next twelve months. In years where there is positive market growth in the Index, the student athlete will receive 100% of that growth and a new, higher, floor payment will be established for the next twelve months and moving forward. There is no cap on the potential growth and most designs are realizing an Internal Rate of Return between 6% - 11% depending on the design.
The Structured NIL Agreement is a fantastic way for student athletes to guarantee financial resources are available for future landmark events, like graduate school, weddings, vehicle or home purchases, start-up costs associated with a business, future investment opportunities, and even retirement. To learn more about SNILA take a look at the Case Studies section below. For personally tailored options, call our office today at 770-886-7400.
How does the Annuity Investment Grow?
Independent Life Insurance company, in partnership with Franklin Templeton Advisors and Bank of America have created the iStructure Index Linked Annuity. Powered by the Franklin BofA Global Index, the iStructure annuity offers a guaranteed payment floor, designed to provide a guaranteed return of investment to the student athlete, with uncapped growth potential over future years, based on the market performance of the index.
In years where there is no growth in the Index, the floor payment will remain the same for the next 12 months. In years where there is positive market growth in the Index, the student athlete will receive 100% of that growth and a new, higher, floor payment will be established for the next 12 months and moving forward. There is no cap on the potential growth and most designs are realizing an Internal Rate of Return between 6% - 11% depending on the design.
The Structured NIL Agreement is a fantastic way for student athletes to guarantee financial resources are available for future landmark events, like graduate school, weddings, vehicle or home purchases, start up costs associated with a business, future investment opportunities and retirement. To learn more about SNILA take a look at the Case Studies section below. For personally tailored options, call our office today at 770-886-7400.
Case Studies
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Maddie is an 18-year-old college freshman, running track for her college. She is offered a $15,000 NIL opportunity. She does not need the money now and is looking to defer first payment as long as possible. She elects to receive a single lump sum at age 50. Through the projected index-linked growth of the Structured NIL Agreement, Maddie stands to earn between $125,000 and $542,000, paying an ordinary income tax obligation in 2055, when she receives the annuity payment.
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Bryce is a 20-year-old college Junior, playing basketball for his university. He is offered a $250,000 NIL opportunity. Bryce needs part of that income now, and elects to keep $100,000 for his immediate use, deferring $150,000 in a Structured NIL Agreement. Bryce hopes to play at the next level, but understands that is not a guarantee. He elects to start payments at his age 30 and has chosen monthly payments from age 35-50. Bryce will pay an annual ordinary income tax obligation for that 20-year period, but only on the amount received each calendar year. Through the growth of the indexed annuity, Bryce can anticipate between $509,000 and $1.2M from the SNILA.
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Caleb is a 21-year-old college Junior, playing football for his university. He is offered a $1 million dollar NIL opportunity. Caleb elects to take $250,000 now, for his immediate needs, but defers $750,000 and places it into a Structured NIL Agreement. Bryce is hopeful that he will play in the NFL and elects to design a combination of monthly payments and future lump sums. Monthly payments will begin at his age 40 and lump sums will be paid every 5 years from age 30-50. Caleb will pay an ordinary income tax obligation in the future year(s) he receives payment but only for the amount received each calendar year. It is anticipated that Caleb will receive between $6.3M and $28.7M based on the performance of the index-linked annuity.
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Brittany is a 19-year-old Sophomore, playing basketball for her university. She has been offered a $100,000 NIL opportunity. Brittany keeps $50,000 for her immediate use, deferring $50,000. Brittany elects to take payments from age 27-32. Brittany can anticipate a payment yield between $84,000 and $123,000 based on the performance of the index -linked annuity. She will pay an ordinary income tax obligation in the future year(S) that annuity payments are received, but only for the amount received each calendar year.