200 young hockey players are about to get drafted by the NHL. Are they really set for life?



    
    RBC offers 10 financial planning tips for drafted and professional
    athletes
    

    TORONTO, June 25 /CNW/ - On June 26 and 27, just over 200 young hockey
players will be drafted to the NHL at the 2009 Entry Draft. RBC's Sports
Professional Program offers 10 tips for newly drafted players to help make
sure their early athletic success translates into long-term financial success.
    "Getting drafted and becoming a professional player is a dramatic change
for an 18-year-old, as they suddenly deal with significantly more money but
also much higher expectations for spending. There is a lot of uncertainty in
an athletic career, so professionals need to start financial planning as soon
as they are drafted," said Darwin Schandor, regional vice-president, Sports
Professionals Program, RBC Private Banking.
    An understanding of financial planning is extremely important for
professional athletes. Within two years of retirement, 78 per cent of former
NFL players have gone bankrupt or are under financial stress while an
estimated 60 per cent of former NBA players are broke within five years of
retirement, according to reports quoted in the March 23, 2009 issue of Sports
Illustrated magazine.
    "In the current economic environment, players and their parents are more
concerned than ever about preserving the wealth they are going to earn," said
Prashant Patel, vice-president, High-Net-Worth Planning Services, RBC Wealth
Management. "A player's career can be cut short at any time. They need advice
to help them minimize tax, preserve capital and ensure their money lasts for
40 to 60 years after their professional career ends."
    RBC's Sports Professionals Program represents professional athletes
across a variety of sports, including hockey, basketball, baseball, soccer,
football and golf. Athletes draw on the expertise of RBC Private Banking, as
well as the RBC Wealth Management Services team of financial planners,
lawyers, accountants, tax specialists and estate planners.

    
    RBC's 10 tips for newly drafted and professional athletes:

    1.  Don't let your signing bonus change your life. Players drafted in the
        first or second round to the NHL can receive a signing bonus in the
        range of several hundred thousand U.S. dollars, but the majority of
        those players will not immediately go to the NHL. Signing bonuses can
        be structured to pay only 15 per cent tax depending on where the
        athlete resides and where he plays.

    2.  Manage your spending - you'll only get paid for seven months of the
        year. With a big cheque coming in every two weeks, it is tempting for
        young players to buy big ticket items and live an expensive
        lifestyle. But NHL players only get paid from October to April
        (excluding playoffs, bonuses and awards). Many players draw on a line
        of credit to carry them through. A financial plan that includes
        budgeting can help keep players on track.

    3.  You probably have to fund 50 years of retirement. Most NHL players
        will play for less than 15 years and retire in their late-20s or
        early-30s. Those who are injured will have even shorter careers. They
        have to start saving early and invest carefully to make their money
        last throughout their lifetime.

    4.  Careful tax planning can make a huge difference. For many athletes,
        taxes are their single largest expense. The multiple filing
        requirements of a professional cross-border athlete can make tax
        planning very complex with the country of residence dramatically
        impacting the overall taxes. Many Canadian resident players take
        advantage of significant tax savings by setting up a Retirement
        Compensation Arrangement (RCA). Players who are married or have
        families can use income splitting tax strategies such as spousal
        loans and family trusts to reduce taxes.

    5.  Fluctuations in foreign exchange can have a big effect. Most athletes
        are paid in U.S. dollars. If they rent, buy or sell property in
        Canada or overseas, changes in the value of the Canadian dollar can
        have a big impact. A number of athletes mitigate their exposure
        through forward exchange contracts and other hedging strategies.

    6.  Before you buy your dream house, evaluate the impact of where you own
        property. In Canada, mortgage interest is only deductible if the
        property is used for investment purposes. For U.S. residents,
        interest on up to US$1,000,000 of the mortgage on the main home or a
        second home can be tax-deductible.

    7.  You will be asked for money regularly - so plan your giving in
        advance. Newly signed players could be particularly subject to
        aggressive solicitations, so they should avoid significant donations
        until they have a plan. Some athletes set up a charitable foundation
        to raise funds, donate to charitable causes and reduce income taxes.

    8.  Endorsement income can offer tax advantages. Canadian resident
        players who receive endorsement income could consider setting up a
        Canadian corporation to take advantage of lower corporate tax rates.
        They will need professional advice for this advanced strategy.

    9.  Protect your assets from lawsuits. High-income and high-net-worth
        individuals are more likely to be subject to lawsuits. Players should
        consider strategies to protect their wealth from creditors, such as
        setting up a domestic or foreign trust.

    10. Protect your family's future through insurance and estate planning.
        Ensure there is adequate disability insurance. Also, some forms of
        life insurance can provide tax-free investment growth. To ensure the
        player's family is provided for, it is important that he make a Will
        and plan to minimize U.S. estate tax, which can be as high as 45 per
        cent, as well as probate tax. One common strategy is to set up a
        revocable living trust to hold U.S. real estate assets in order to
        avoid U.S. state probate tax.
    

    The RBC Sports Professionals team includes retired athletes, top advisors
and wealth management specialists. RBC advisors provide tailored strategies to
help athletes manage their finances and their lives, including cash-flow
management, cross-border tax solutions, investment management and estate and
retirement planning. For more information please visit
www.rbc.com/sportsprofessionals.

    About RBC Private Banking

    RBC Private Banking professionals help high-net-worth clients, their
families and their businesses simplify their banking, manage their assets and
take more control over their financial futures. Private Banking teams deliver
integrated wealth management advice and planning with specialists across RBC,
sophisticated credit solutions designed for high-net-worth clients, customized
cash management solutions and tailored banking services for the needs of
high-net-worth families. RBC Canadian Private Banking was ranked number one
for best overall private banking services in Canada, according to the
Euromoney 2009 Private Banking Survey.

    About RBC Wealth Management

    RBC Wealth Management directly serves affluent and high-net-worth clients
in Canada, the United States, Latin America, Europe and Asia with a full suite
of investment, trust and other wealth management solutions. The business also
provides asset management products and services directly and through RBC and
third-party distributors to institutional and individual clients, and has more
than $480 billion of assets under administration, more than $230 billion of
assets under management and nearly 4,500 financial consultants, advisors,
private bankers and trust officers.





For further information:

For further information: Tanis Robinson, RBC Corporate Communications,
(416) 974-1031; Matthew Gierasimczuk, RBC Media Relations, (416) 974-2124


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