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Reaching the upper echelon of a sports or entertainment field takes the right combination of talent, perseverance and luck. The reward can be fame, satisfaction, and of course, large amounts of money.

But with financial success comes the challenge of stewarding your newfound wealth and ensuring your estate can provide financial comfort after retirement, and a legacy for the next generation.

This can be a challenge in a career that may be extremely lucrative, but potentially short-lived. So it is important to begin putting an estate plan in place during those early high-earning years.

“These are people who have uncertainty of earnings," says Jonathan Gold, a director in the Sports, Media and Entertainment team at RBC Wealth Management in London.  “The actor may not get another role, the musician may not produce another album or the sports star may critically injure themselves."

For high-profile people with complex needs, working with a team of legal and financial experts is a good place to start. “In conjunction with estate planning professionals, you should be working with a team to establish a structure that serves as part of your estate plan," Gold says.

Ring-fencing your assets

Having an uncertain window of prime income means it is important to go beyond the typical estate planning playbook. To make use of strategies and structures that not only protect funds but also allow access if you have a career setback.

Protecting wealth within a trust structure can keep earnings safe until the time comes to pass on your estate, says Chris Belcher, a partner at Cambridge law firm Mills & Reeve. A trust can also offer added privacy – compared with a will – and is typically settled more quickly when they are passed on.

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“We'd certainly be looking at setting up trusts, particularly if they have young children, and starting to think about putting funds away for the next generation," he says.

At high income levels, prenuptial agreements are increasingly common to ensure the safety of assets brought into a marriage.

A prenup can be an awkward subject to broach with someone in a committed relationship. But Belcher says it's an important and appropriate protection for the clients he advises.

For those with international careers or who may be from another country – such as a footballer moving from club to club – agreements also need to be tailored to take into account their assets in other countries. “They've got their assets spread around the world, and that's a unique challenge," Belcher says.

Options for income

A potential way to manage income when earnings are uncertain is through insurance products that function more as investments than as traditional life policies.

An offshore investment wrapper, which allows investment decisions to be made without having to worry about the capital gains tax charges, is one such vehicle, says Dion Lindskog, head of Wealth Structuring at RBC Wealth Management in London.  

Even though these wrappers are technically insurance products, it is important to remember that the value of the investments they hold can go down as well as up, and that the loss of original capital might occur. For this reason, it is important to speak to a financial adviser who can help to determine if this type of arrangement is suitable for you.

When using an offshore investment wrapper, there is the ability to supplement income when earnings from a career temporarily reduce or stop. Up to 5 percent of the total investment can be withdrawn from the bond each year for 20 years with income tax deferred during the period. While the tax treatment depends on each person’s individual circumstances and may be liable to change in the future, for someone with uncertain earnings, if income is not required for one or more years it can accumulate. For example, by deferring the withdrawals for five years, should the need arise it is possible to withdraw up to 30 percent in year six without incurring income tax charges.

“It basically means that the investment can grow tax efficiently, and that works very well for somebody who is young, where they need this to produce an income for them for 30 or 40 more years," says Lindskog.

Consider incorporating

Incorporating – becoming a company, such as a Limited Liability Partnership – can also be a way to protect assets. This structure has its limitations, as it can be difficult to remove assets on short notice, so it is something to be used alongside other strategies.

But becoming a company allows you to pay taxes at lower corporate rates and also provides liability protection in the event of insolvency. A corporation also has the benefit of remaining after the death of the owner, which makes it a good vehicle for transferring wealth to the next generation.

“We're looking at a chunk of somebody's wealth that they want to invest for the long term and they are probably not going to want to spend the income now. They can look at this as a long-term investment or plan either for them or for a future generation," Belcher says.

Managing the public persona

The fame that often accompanies sports, media and entertainment careers can vary in intensity, but expecting a high level of scrutiny is par for the course. This can have advantages and disadvantages both personally and financially.

Gold says RBC often advises high-profile clients to construct an investment portfolio with a heavy focus on companies that meet ESG – environmental, social, and corporate governance – criteria. These standards can include how a company treats its employees, deals with suppliers, and interacts with the communities in which it operates.

“They are attaching themselves in a way that says what they own matters," Gold says. “If you are a high-profile person, you don't want to be embarrassed by your investments."

Starting early

Perhaps the most difficult mental leap for someone who has ascended suddenly to the public eye is understanding that financial planning should start immediately. It can be difficult to set up certain structures – a trust or an LLP for instance – once the client has made the bulk of their money.

Not having advisers in place and affairs in order can lead to increased scrutiny, raising the possibility of the wrong kind of fame, Belcher says.