Raising Division I Athletes (podcast)

00:35
that student athletes and their families face. As always, I'm happy to have Rebecca Pavese with me on the podcast. Rebecca is a vice president here at Palisades Hudson, based out of our Atlanta office. She's worked extensively in our tax, financial accounting, and estate planning and administration practices, and she's a member of the firm's investment committee. In addition, Rebecca co-leads our Entertainment and Sports practice. Rebecca, welcome back to “Something Personal.”

Rebecca Pavese
Thanks, Amy. It's a pleasure to be here.

Amy Laburda 01:02
So Rebecca, I kind of have you on in a double capacity today. You're here as a financial professional, as you have been in the past, but you're also bringing the perspective of a parent who supported her children through their sports careers, up through the college level at this point. So let's start with your personal story before we get into the finance and the nitty gritty.

01:20
To the extent you're comfortable, why don't you just give our listeners sort of an overview of your daughters’ athletic careers to this point and how that's affected your family.

Rebecca Pavese
Sure. My oldest daughter, Lexi, is a junior at the University of Tennessee, and she went there on a cross-country and track scholarship. My younger daughter, Mac, is a freshman at Clemson. She's there on a softball athletic scholarship, and their season just opened actually last week [at time of recording] in Clearwater.

Amy Laburda
Awesome. So I know that no one gets to play college sports without a long career stretching back into their past before.

01:50
When they were younger, how did they get into sports? Was it self-driven? Was it a thing you knew that you wanted to encourage? A combination of the two?

Rebecca Pavese
So they actually both got in very young, kind of just, you know, in the rec program, something they wanted to do. You just started something they were interested in. My husband and I both played softball and baseball growing up. And so that's kind of where we started. That was what our family had done. So they… Our oldest started at six. Our youngest actually started at four. At that point, it was just for fun, something to do to see if you liked it.

02:19
And then as they evolved, they just kind of took it to a different level. But at that age, they were just getting out there to play, to do something, and to be involved in something, right, with their friends. And then it evolved from there. They both played softball to start, and then our youth program has a tremendous basketball program. They played basketball. Lexi kind of picked up running on the side. She did the Peachtree Race in Georgia, the junior version, in first grade, and then went on to run the actual Peachtree Race, and

02:47
kind of just felt like running was natural for her and evolved. She did both running and softball probably through fourth or fifth grade. She did basketball through middle school. She finished in eighth grade. And then in high school she just did track and cross country, and focused her efforts on, you know, excelling in that sport.

Amy Laburda
Did Mac specialize earlier? Or did she also have that sort of portfolio of multi sports when she was younger?

Rebecca Pavese
So she had that portfolio of multi sports [earlier]. She was kind of different in the sense that, like,

03:17
she had this unwavering desire to compete at such an early age that you knew that she was going to be something special, in hindsight. You didn't kind of want to admit it at the time. But this was a four-year-old who was out there playing six… you know, with six-year-olds, and she could keep up at that point. And then Lexi was taking batting lessons. So Lexi was about eight. Mac had not turned six yet, and she… All she wanted was batting lessons. She's like, “Can I have hitting lessons? Can I have hitting lessons?” And so we told her

03:44
when you turn six, you can have hitting lessons. And her birthday came around, she was like, OK, like, I'm ready for my hitting lessons. And so you knew at that point… And her ability was above where average people were. But you also don't know, sometimes you see kids that are very good young, and then they peak and they don't go on to do anything. She was super interested for a kid at that age. And she's also my shadow, though. So she was in second grade and she was like, do you think I can play college softball? And I said,

04:14
yes. And so she picked a local school that’s super close to home, a smaller school. And I said, maybe you should go a little bit further away than that. And she said, can I go to Oregon? And I was like … They had just done a special on ESPN showing their new facilities and their Nike and I was like, sure, you could go to Oregon. That would be great. So that's kind of where her college dream of playing softball started. And you know, we were also realistic at that time. We didn't push our kids to an elite travel level

04:40
super young. We let her play in our rec program through eight. She played all stars and, you know, we didn't move on to travel until it was time to move to that next level. It wasn't that we pushed them super young. And then she was playing basketball as well. She played travel basketball simultaneously with softball through fifth grade. At that point, she knew she wanted to be a collegiate athlete and kind of saw that her chances of going in softball were going to be a lot better than going to the level in which she wanted playing basketball. And in the end, she just actually liked softball better.

Amy Laburda 05:09
So it sounds like it's really sort of the combination of things you see as your kids grow, like both that talent that people start with innately, but also just the love of the sport, to want to keep getting better, to want to take those batting lessons, to really invest in it that way, which seems very self-driven for your girls.

Rebecca Pavese
Yes, and that was important. When we were raising them, we wanted, if … Whatever they were going to do, they had to want to do. We weren't going to be like, you have to go out and practice. It wasn't going to be

05:34
something that we were constantly fighting about. Like you have to do this or you have to take lessons or you have to go out and practice. Like, you have to want to go out and do it on your own. Of course, motivation is not always there. And some days you're like, should you do this? But it was more so just a gentle push or, like, a reminder. And like, yeah, I need to go do that, even though I don't want to. And they are crazy hardworking. And I think that is something that ,to succeed at the level in which they did, like, you have to have that personality. You have to

06:01
be able to make sacrifices. You have to have the discipline to be able to say, I'm not motivated today and I'm going to do that anyway. And obviously that's more toward the end of the … You know, as they get older, those things become more important. But when you look back and you say, why did we start playing youth sports? Like, this was the goal for her at a young age, but we knew that this wasn't necessarily going to be how it ended. So when you're investing all that money,

06:26
you're doing it for other things, right? The girls were there to learn other lessons as they played these sports. They were learning how to work with others, how to be a good teammate, how to win and lose. And even how to win and lose comes with different emotions at different ages, you know, and how to be humble. And as you succeed in these sports and, you know, not to be overconfident, but to have enough confidence that you believe in yourself.

06:53
There's, you know, as you've probably seen in the sports news and which I've seen through these girls is how to, you know, to protect your mental health during all of this.

Amy Laburda
Of course.

Rebecca Pavese
You know, you're constantly striving for perfection or excellence. And it's a matter of how, when you're striving for those, to accept the failure and not to let the failure break you, but how to come back. And they both had different struggles with that. That's not an easy thing. There were times that, you know, their self-worth was too connected to the sport.

07:23
And they figure out how to get through that. So the lessons that they learned along the way, even if it did not end up being a collegiate career for them, would have been valuable.

Amy Laburda
Right. I mean, I think, like, for any kid, but especially in sports, it feels like, you know… “Losing doesn't mean you necessarily did something wrong” can be a hard pill to swallow where, you know, when you're very little, it's like, oh just do your best.

07:46
And then as you get older, that shifts a little bit. And I imagine that's … that can be a bumpy transition, especially for very competitive kids.

Rebecca Pavese
Exactly. And kind of the lesson that you take there, and coaches tell them and we tell them, is control the things that you can control. Right. Did you put the work in? Did you get enough sleep? Did you take the right nutrition? On that part, it's almost more important for Lexi as she was racing to, you know, did you get enough calories? Did you eat the right things? Did you have enough to drink? Because those are going to impact your run right away.

08:14
Did you go with a good attitude? Did you do the things the coaches told you to do? Did you stretch? Did you recover? Did you take your ice bath? If you did all of those things, and you went out and you tried your best, like, that is really all you can do at any level, right? You see that from rec all the way up to the pros. They're going to make mistakes at every level.

Amy Laburda
Of course. As we're recording this, the Winter Olympics are still going on. And, you know, the thing I think of where it's got to be so tough to, you know,

08:38
not medal or not gold, but you still made it to the Olympics. And it's like, you know, that that moving target of what feels satisfying to you has to be frustrating sometimes.

Rebecca Pavese
Yes.

Amy Laburda
So you mentioned in passing a couple of moments ago the financial commitment. I understand that having kids who do sports can take both a lot of finances and a lot of time on their parents’ side. You don't have to get into specifics more than you're comfortable with. But I was just wondering if you would talk for a little bit about how you and your husband sort of

09:07
fit in your daughters’ sports career into your family life, into your budget, into your schedule?

Rebecca Pavese
Yeah, so like I said, when they were young, they just played through the rec program. So that's a pretty limited financial commitment to start. And they start with the All-Stars, right? And they did that. And that didn't involve a lot of travel, a little bit over the summer, but kind of in place of a family vacation. So with work and with life, it kind of just flowed naturally. Then as they get to the higher levels, the commitments become

09:36
greater. You're joining a team that has dues. Can you afford that? And also the time commitment, as you know, and anybody that I've worked with here is, as these last few years, as Mac has been in these elite levels that required them to go to California and Colorado for 10 days each over the summer. And I was lucky enough to have the vacation time to take those vacations, or to work remotely for portions of the days when they aren't playing. And also Bob and I were

10:04
able to cover that financial cost. For families that don't, you'll come across… There are opportunities within different organizations that people will cover, or teams will get sponsored. You could fundraise. So there is a real cost, and the cost isn't just in the dues of joining the team. The real costs come in the travel component of flights and hotels and just food while you're traveling.

10:27
So if you can't cover that, it's a matter of: Can you get a sponsorship or can you fundraise? And most organizations provide a way for you to cover that if you can't cover it out of pocket. Track and cross country is a less financial sport. There's just not as much travel, and she's not doing as much as that. A lot of it was local in high school. So, like college [softball], first off all, you're not really recruited out of high school. You're recruited out of travel and club ball. Whereas for cross country, you're recruited

10:54
mostly out of your high school times and the races. So that obviously doesn't cost anything. You're just competing with your high school. And then the other thing that's not there is like, so you have lessons, right? You have trainers, you have, you know, hitting lessons. You have fielding lessons. You have strength and conditioning outside of your teamwork. So a matter of what you're paying for that and what you can afford, versus what you're doing on your own, is another cost. And we were lucky

11:20
to have help. My dad was able to take Mac to hitting and fielding lessons when she was young, until she was able, essentially until she was able to drive. Not that Bob and I never took her, but we were able to have help. Or, you know, friends that are, you know… [who] had a mom that worked from home [and] was able to take them to lessons. So we were really lucky to have people to help out in the after-school portion.

Amy Laburda
So you just mentioned the difference in recruiting.

11:46
And I wanted to talk for a little bit about the college process for Lexi and Mac. Both of them, as you mentioned, are at Division I schools. But their journeys, because they were in different sports, probably looked pretty different. So beyond just being recruited out of travel versus recruited out of school, what were some differences you saw? What were the timelines like for them?

Rebecca Pavese 12:07
Yeah, so the timelines and the experiences are totally different. So Lexi was going — she's a distance runner, looking to run cross country and the distance events for track. So it's very time-based, right? You have these events in high school, and they have recruiting times. And you just kind of go to some camps and train yourself, and then you basically send your times to these coaches of schools that you'd be interested in going to. And then there's not a lot of conversation with the

12:33
collegiate coaches for track and cross country until you're at your recruiting date, which for cross country is June 15th of your sophomore year. So going in for that summer. And then that's when Lexi reached out, you know, had had some conversations with coaches and did a few visits that summer. And actually she committed early in August of her senior year. So … But it was, she just went on… June 15th came, she reached out to the coaches that she had been interested in, schools she would be willing to go to.

13:01
Ironically, she had visited Tennessee on a fluke. My husband and Lexi were driving up to New Jersey. They were passing through Tennessee. She's like, hey, let's stop and look at Tennessee. It wasn't really on her radar of somewhere she wanted to go. And she fell in love with Tennessee. So that had been going into her sophomore year. Tennessee was on the radar. She's like, I love this place. I would be so happy here. And it's just under three hours from where we live, so that

13:27
was high on the radar. And she had gone on some other visits. And in the end, the offer came that she was happy with from Tennessee. And it was important to us that our school — kids, when they picked a school that, god forbid something happened, if you walked away from the sport, that you would still be happy at that place. And we knew that where she fit in at Tennessee, that was going to be great for her. She would want to stay there. And Tennessee, when Lexi was recruiting,

13:54
she is a nursing major and she wanted to be a direct admit out of high school. So she was looking at programs which allowed that. Not many do. Tennessee was a program that did allow it, and also had a nursing school that she could apply right to from high school. So it kind of checked all those boxes and that worked well for her. She has seen a lot of … At Tennessee, they have had coaching changes. They've had kids go into the portal so,

14:21
you know, she was still happy there and, you know, regardless of what happened with the track and cross country team, she was going to stay there.

Amy Laburda
Yeah.

Rebecca Pavese
Compare that to softball is… You know, Mac was, early on in softball, the recruiting date — kids were committing in middle school.

Amy Laburda
Wow.

Rebecca Pavese
And it had evolved, while she was in the recruiting phase, her class, they could not talk to, officially talk to college coaches until September 1st of their junior year.

Amy Laburda
Yeah.

Rebecca Pavese 14:46
But before that, you can kind of talk a little bit through your travel ball coaches, but you can go to camps. So you visit these schools, and you have a lot of exposure to say, like, hey, do I like the school? Do I like the city? Do I like the coaches here? Do they kind of have a vibe with me? Could I see myself playing there? So you just get a lot more exposure. You're able to go to multiple camps. They're open to everyone, but there are, like, elite-level camps that, you know, coaches invite you to. So she was able to … I mean, she went to a bunch of

15:13
camps all over the country. Then she narrowed it to say, hey, don't want to go this further than this far from home and kind of focused there. And then once her September 1st came, [she] was able to have conversations with multiple coaches. And then she wound up in Clemson, which is the perfect fit for her.

Amy Laburda
Yeah. I talked earlier this season to Rick Clark of Georgia Tech, who's a college admissions professional.

15:35
And one of the things that we talked about was just how fit is so important, but also kind of so elusive, right? Until you talk with the coaches, you see where it is. Lexi's Tennessee story just made me think of: The college I eventually went to is one that was not on my radar either. And a guidance counselor suggested it to me and was like, I think this would be a good fit. It's really interesting. Once you add sports to the mix … I think in my mind, I was like, oh, it's so different, but it sounds like there's a baseline [of] picking a college that, you know, you're still

16:04
a high school kid ready to step out for the first time. And, like, those considerations are still on your plate, as well as the athletic side.

Rebecca Pavese
Absolutely. And I think changing the recruiting date for softball, where you saw it go from middle school to September 1st of your junior year,

Amy Laburda
Yeah.

Rebecca Pavese
kids are just in a lot better position. There's no way when you're in middle school that you're committing on anything other than the name, or how they performed in the previous College World Series, or they're just your home team. Right? Like that's, you know, your childhood dream.

16:33
You're just not ready to make that decision yet.

Amy Laburda
Oh, sure. I mean, thinking about when I was 11, 12, 13, like, that's a big decision to put on a kid.

Rebecca Pavese
Correct.

Amy Laburda
For sure. So obviously for both college kids generally, and student athletes specifically, finances are often a part of the discussion when you're picking a school. If you're comfortable sharing, how did you and your husband talk to your girls as far as about…

16:57
Was there a certain contribution you were really looking for? Were you just comparing offers and sort of seeing where they landed? Or did you sort of, like, give them freer rein and were like, we'll figure out the money part of it?

Rebecca Pavese
We definitely gave them free rein, especially … Even before they were recruiting, they knew that they didn't have to go to — they never thought that they had to go to school to play a sport. That Bob and I, when they were young had, you know, opened 529 accounts for them. We had saved for their college education.

17:25
And going to school … that wasn't their only opportunity. There are kids that, going to play sports is their only opportunity, in a way that they're going to be able to finance going to college. The girls knew that was not their only path, so that they needed to go somewhere where they were going to get a good degree. Because the reality is, especially for women, you know, college sports is kind of the end of the road. And when you come out, you're going to need a job. So it's important that you go somewhere where you're going to get a good education, where they have the major that you want, and

17:53
that you're valued, right? So those are other things. For our girls that wasn't just financial. But obviously when it comes down, if you have multiple places where you would be happy, then you're looking at finances and offers and different things from schools, whether you get academic money or all athletic money, a little bit of both. And then you decide is that what you want to do.

Amy Laburda 18:14
So this is probably a bit of a common sense question, but I take it you didn't just stop funding the girls’ 529s the moment it became clear that they had a talent.

Rebecca Pavese
Yeah, no. We kept funding the college savings accounts well into high school, lowered the contributions when we knew, at a point in which you would see, you know, change your asset allocation or make them more conservative was kind of the same point in which we decided, OK, these are funded enough that we don't need to continue to contribute to them. And whether they're used for undergraduate or graduate, these funds

18:43
are sufficient and are there for the girls.

Amy Laburda
Yeah. So with an athletic scholarship, a thing that I was never involved with myself, I imagine that there are factors that you're looking at in the offer above and beyond just the dollar amount, as far as, you know, when it applies, what the duration is, that sort of thing.

19:02
What were some of the factors that you were looking at when your girls were getting offers?

Rebecca Pavese
Yeah, so you only see the offer for your own daughter. You don't know how offers are working for everybody else. But what you're comparing and what we were told is, you know, how many years the offers are for. Some offers are for one year, some offers are for four years. And then you wanted to know, people told us when we were going in that, don't take a dollar amount offer, take a percentage offer. Because as tuition increases, you want the percentage to increase.

19:30
So there are different technical things like that that people told us to look for when we were, you know, the girls had gotten offers. But other than that, it was just kind of, would it make – be a good fit? Is that sufficient to what you want to do?

Amy Laburda
Yeah. So zooming out a little more broadly, I think it's fair to say that college sports as a whole have changed a lot in the past decade or so.

19:53
A lot of the sort of news coverage and the fan conversation has focused on revenue-generating sports like football, men's basketball, a little more women's basketball post-Caitlin Clark. But I imagine that there are ripple effects and knock-on effects in the rest of college athletic departments, as we see these NIL deals. There's been discussion about pay for play. So we'll dive into some of them a little bit more specifically, but just broadly:

20:20
You obviously haven't had girls in college for that 10 years, but are you seeing any shifts, any things that are sort of still in motion in the college athletic departments more broadly?

Rebecca Pavese
Yes. So the interesting thing is, was House v. NCAA was going into — was, you know, being heard and ruled on while Mac was in between her offer and her signing year. So there were different things: If this goes into effect, it will be this. And if this doesn't happen, it will be that. And

20:46
even seeing with Lexi, in that interim of where all the rules were changing and … but nothing was official yet. But schools were trying to jump ahead and plan for it. So you had changes. In the cross country world, you saw it more in … They were having issues with the roster cap. Right? So they were getting more scholarships, but their roster number was — spots were significantly decreasing and their … all their rosters were larger than that. So they were either trying to force people out. They were either going to cut people or people were going into the portal to other schools.

21:14
And you saw kids on the fringes jumping into the portal, because schools didn't know what they were going to do. They didn't know how it was going to shake out. And so everybody was kind of in protect themselves for how it's ever going to work out. At that point, you actually didn't see the grandfathering rules were coming in. So these excess and rosters would have been OK. Not that necessarily all the schools would have honored them, but you didn't see that coming into play, where you would have been able to keep more kids than the roster spot and just how the scholarships and what schools were

21:42
offering was changing in that whole interim time.

Amy Laburda
Yeah.

Rebecca Pavese
And so, like, Lexi started, Alston was a thing. Alston is not a thing anymore. So you're just seeing the environment change in real time.

Amy Laburda
Yeah. We've touched on the portal a few times. I'm sure many of our listeners know the transfer portal well, but since it went into effect, I think in 2018 or so, have you seen any effects as far as, you know, not only just

22:09
the kids sort of having less ties to the school, but effects on the team? Effects on friendships within … Is there sort of a more precarious feeling now that the portal is a fact of life, I guess?

Rebecca Pavese
Yeah, now that, like, you can see the portal. And you can see it from the outside, and not having a personal attachment, you see its value, right? Like, you know, better off, you're betting getting a better offer, you're going to a better fit.

Amy Laburda
Yeah.

Rebecca Pavese
From the personal side, I've watched

22:35
Lexi make friends with kids. She actually, unfortunately, like, two of the girls that she was like closest with her freshman and sophomore year had both gone into the portal. And it was the right decision for them, and she wasn't upset that they went into the portal, but she was sad to lose girls that she had, you know, made some really good friendships with. And she has kept in touch with them. But it's hard to see that. So you're creating these team cultures, but then it's not the same team culture because kids are going to leave every year.

Amy Laburda
Yeah.

Rebecca Pavese 23:00
Obviously, Mac is a freshman, so she hasn't seen it yet. But we were … One of the things that Mac did look at when she was at school, when looking at schools, was how active are people in the portal? And she was, you know … Clemson doesn't really lose kids to the portal. They've gotten some kids in from the portal, but you're not seeing a lot of kids leave, which, you know, is a good sign when you're looking for a culture and a team and a family-type fit.

Amy Laburda
Yeah, for sure. I think especially in a team sport, it just has to be so tough, feeling like the ground can shift under you that way.

Rebecca Pavese 23:30
And it's hard in the recruiting world, right? Because you're looking at a team and what they have and where you'd fit. And being like, OK, do they have that position? What are my chances of playing? So you kind of make a decision on that. And then you could commit to a school. And then they take in somebody from the portal, and you're like, oh, gosh, like I would have made a different decision how I would … If I would have known that. And there's no way around that. Everybody's being subject to that. But it's impacting it greatly.

Amy Laburda
Yeah. So we mentioned, you know, obviously some

23:59
proportion of college athletes are hoping to go pro, or going to the pinnacle of their sports. But for many women's sports, and honestly for many kids playing men's sports as well, that's just not going to be the reality. And some of them probably don't even want to pursue that. We talked a little bit about the position of youth sports in the world, but what have you seen your girls get out of college sports, sort of for their own sake without that — you know, I think in the media we talk about, oh, college is a launching pad for a pro career.

24:28
But that's truly such a minority of kids.

Rebecca Pavese
Right. My girls are not in collegiate athletics to go anywhere pro. Lexi will run for life. She's actually been doing some marathons while she's at school, and running is, you know, will be a lifelong thing for her, but not in any pro level. So it's just for the girls, especially for Lexi, it was a matter of team and a culture and a group of people kind of like like-minded to her with the same values and motivation and hardworking traits that,

24:56
you know, were similar to her, and kind of the environment that they provided. And I would say even though Mac may have the opportunity to advance to the next level, that's still very small. They both … She's in school with the mind that she's going to come out with a job and is there for, obviously, help with education but, you know, for the culture and the environment that it's providing.

Amy Laburda
Yeah. I mean, it sounds like, as we were talking about with the Olympics before, like,

25:22
getting to the college level is in itself a success. And I imagine it can be sometimes hard to like stop and smell the flowers, because there's not like the moment you're like, I did it. It's a thing you're doing, ongoing.

Rebecca Pavese
Right. I hope she looks back though and knows that that was, like, the ultimate goal that she set for herself, you know, in second grade. And you got here and you're doing it, you're playing. She's already had the opportunity to play. So, so far so good.

Amy Laburda
Yeah. Well, I think

25:48
goal-setting is probably as good a transition as any to put your financial planner hat on a little bit more. I thought we might just talk a little bit about some of the financial planning concerns that you see, not only for college athletes themselves, but for their parents, for their families as people are going into it. When you, or one of our colleagues, is talking to either a young athlete on our Entertainment and Sports side or to a family with a kid who's going on to the college athletics,

26:14
what is sort of a basic starting point? Where are you going to check in first with them?

Rebecca Pavese
Just that they realize that some of this money is taxable, that these kids are going to have tax compliance. It's not just, oh they're in college and they're playing sports and just going about their everyday business, as if they did the same thing when they were in high school. Even if you're not doing an NIL [deal] or revenue sharing, you're still, if you, some part of your athletic scholarship itself is going to be taxable.

26:40
There's a difference in what's qualified expenses for scholarship versus what's qualified expenses for 529 plans. So I think that may be a disconnect for people, right? 529 plans cover room and board at the cost of the college. Even if you live off campus, you can get … they cover the cost of what you would have paid if you lived on campus. Scholarships, they are only — Qualified expenses for scholarships only cover tuition, and then there's some fees and stuff, but they don't cover room and board.

27:08
So I think that is something that people don't realize. And then people also get NIL money, or have in the past, and they're like, oh, I used it for room and board. So they think it's not taxable, whereas all NIL money is taxable.

Amy Laburda
OK. So if you're getting taxable money in, is that a thing that people will generally need to pay estimated payments for quarterly? Or is it a thing to sort of deal with at the end of the year, like you would with a W-2?

Rebecca Pavese 27:31
They should at certain dollar amounts pay in estimated taxes. Right? If you're having income and you're not having any withholding on it, which you're not having on scholarships or NIL money, you're going to have to pay in estimated taxes. Of course, if it's small and you're going to be underneath the threshold in which that's required, you would not have to. But if you're making any kind of significant money through revenue sharing or NIL deals, you're going to have to make estimated tax payments or be subject to estimated tax underpayment penalties and interest.

Amy Laburda
Yeah.

27:58
I've talked with some of our colleagues in the past, and my understanding was that at least the last time we touched base on it, anyone who's getting NIL, which we've been throwing around – name, image and likeness, I assume most sports fans are aware at this point. People who get NIL deals are often treated as independent contractors. Many of them set up LLCs to deal with it. Is that still a thing that is mainly how that's being treated right now?

Rebecca Pavese
So you're going to see that more in people that are getting large

28:25
NIL deals, that that kind of planning is happening, right? The offers are so big that you're doing some kind of advanced planning for that. And the important part is if, when those are being paid and you're in NIL, you're also paying the self-employment tax on it. It's not the federal income tax, and state. You have an additional tax on it for the self-employment.

Amy Laburda
So, you know, we've sort of wandered away into the footballs and the basketballs of the world, with these bigger NIL deals. But for those students who are getting those bigger offers, what are some sort of

28:54
budgeting basics to keep in mind, especially if you're getting it as a lump sum or a couple of bigger lump sums? Are there particular things other than taxes that they should be watching out for? Or is it just sort of the budgeting basics that you and I actually talked about in an earlier episode, which I can link in the show notes?

Rebecca Pavese
So when you're getting these big offers, right, it's a lot of money that these kids have not seen before. And they're so young, so they're trying to make good decisions. And you just want them to be educated in how money

29:22
works. If you spend it, it's not going to be there anymore. And what this money can provide for you in the future, the value of investing versus spending it now is very tempting, likely, for these college kids. So it's a matter of just general financial planning of the value of investing, the value of saving after you've paid your taxes.

Amy Laburda
Makes sense.

Rebecca Pavese
We've seen, obviously, as you mentioned, these are big in basketball and football. They're seeing the bigger offers. But

29:48
softball had its first seven-figure deal with NiJaree Canady out of Texas Tech. She's a pitcher. Texas Tech got her to come there from Stanford. They made a large payment, and it actually worked out well for them. They made the College World Series and played in the championship game last year, losing to Texas, but they made it there. So you saw in theory that worked, right? You went out and you made the biggest deal. You paid the most money for a pitcher and she had the success that you expected,

30:16
which was great. So… But it's a matter of — and it's nice to see women athletes paid that, what they're valued. Obviously that's not going to be the same for anything. She is a phenom. She can pitch and she can hit. So obviously, that's not what everybody can do, but you're going to see more of that as it evolves.

Amy Laburda
Yeah. I cannot imagine being handed a seven-figure deal as a college-age student. I think, like, just the overwhelm of, like, trying to figure out what to do with it would, would be real. But, you know,

30:46
hopefully you've got parents, you've got professionals you can trust, in an ideal scenario that you don't just have to decide on your own.

Rebecca Pavese
Yeah. And you'll see, that's out of the Texas Tech Collective, which is actually one of the biggest collectives around. And they have gone out more so than any other school and kind of repeated it a little bit this year, not to the degree of what the offer was for NiJaree, but other athletes that they got to come in there. So there's, as you mentioned earlier on the portal, these deals, they have….

31:14
It's a matter of, you know, can you create a culture that is going to win, or can you buy it to create that culture? We haven't seen how that's going to play out yet.

Amy Laburda
Yeah. And I imagine, we touched briefly on the court cases House and Alston earlier, and I feel like we're also going to see bigger changes as revenue sharing and pay for play is possibly evolving. It seems like attitudes have certainly been evolving, but, you know, the actual regulation and laws around it seem like they're shifting as well.

Rebecca Pavese 31:40
Right. So there's Title IX lawsuits or appeals against House right now.

Amy Laburda
Yeah.

Rebecca Pavese
I understand the Title IX aspect of it, but also am cognizant of the fact of what, you know, raising two girls, what collegiate athletes has already evolved and had been able to offer to them, versus knowing that it is basketball and football that are primarily raising the revenue and understand as a, you know, a finance person that the people making the money should should get the money. So I understand. I

32:08
see from both sides.

Amy Laburda
Yeah. I mean, as we were talking about earlier, you sort of have college athletic departments that are trying to serve a lot of people with different goals, right? You've got, you know… College football and college basketball are these huge machines, parts of our sports and entertainment industry in this country, both as feeders to the pros and in their own right. But then you also have people who are engaging in college sports

32:32
because they enjoy it, because they want to meet people, because it's an engaging supplement to their academic life. And trying to lump everyone else together and treating everyone fairly in this sort of disparate [area], seems like a hard needle to thread. I have some sympathy for that, for sure.

Rebecca Pavese
Because it's not that the football or the basketball players are working any harder than these other athletes, right? They're all training in their sports and working as hard, and they're doing the study hall hours, and they're going to class, they’re

32:58
you know, essentially working 40 plus hours a week to get everything done. And football isn't working harder than softball, or isn't working harder than cross country. It's just a matter of football is an industry which is more appealing for the public to watch. So they're going to pay more.

Amy Laburda
Yeah. And you've got TV rights, and everyone engaged in it who doesn't have any connection to a player or the school, but just is a college football fan, is a college basketball fan.

Rebecca Pavese
Exactly.

Amy Laburda
Yeah.

33:27
While we're talking sort of financial fundamentals, the Affordable Care Act a few years ago made it so that most kids can, or young adults can stay on their parents insurance through 26, which will cover most regular undergrads. But are there other health care concerns for athletes who are, you know, more prone to injury, more affected by an injury if it happens? You know, a non-athlete college student

33:50
breaks her ankle and it's an annoyance that she has to get through, versus an athlete that can sort of derail a whole semester or beyond. So are there any financial planning or medical planning things that you would encourage people to look at?

Rebecca Pavese
So there's no additional insurance planning. The girls are still covered under our insurance and nothing separate was required. Actually, Mac broke her thumb her senior year in high school, and because she had already signed with Clemson

34:15
they did ask to reach out. We did talk to them. That was still all covered under our insurance at the time, but they did have people that look at it.

Amy Laburda
Nice. So I guess, more broadly, we've touched on a couple of these questions, but as we talk about on this podcast all the time, there's no one-size-fits-all. Everyone's situation is different. If a student athlete, or their family, or the two together, are looking to get professional financial advice, what are just some basics to look for? I guess this kind of falls in the bucket of

34:42
how do you look for a financial planner, regardless of what you do? But are there any sort of things you should understand about a professional you're looking for? Should you get recommendations? What would you suggest as a process?

Rebecca Pavese
I would suggest you find somebody well-versed in the industry, someone that understands it, either from a personal [perspective] or that they've been working with people in that market. And then someone, as the underlying premise in all of this is, someone that you trust, someone that you can have a conversation with, someone you can be honest and say,

35:11
you know, our family's never seen this kind of money. We've never known what to do with it. And to be able to have a conversation without judgment and feel that you can talk through all the scenarios and what works best and while you might have ideal planning upfront that may be the initial offer, you do something else and then you evolve from there. But make sure that someone's going to get you compliant and then work from there.

Amy Laburda
Yeah, it sounds like you're going to look for someone who you can trust

35:37
and whose advice you're actually going to take, right? If you're paying for advice and then you just ignore it, there's no point in that, really.

Rebecca Pavese
Exactly. You want to have someone that you can have a conversation with and kind of guide you along this process.

Amy Laburda
Yeah. Well, returning listeners know that I like to wrap up my episode by giving my guests the last word. Rebecca, I really appreciate you sharing your story. Some of it I didn't know. So it was exciting for me to get a little window into your life as a mom of athletes.

36:06
But was there anything, either on your personal side or on the financial planning side, that you wanted us to talk about today that we didn't get to? Or any just last closing thoughts you'd like to leave our listeners with?

Rebecca Pavese
So as you raised athletes, I say it is not for the weak, right? This process is hard. You're going to see your kids succeed and you're going to see them fail and there's … In athletics, it's something when you fail that they, at this level, that you can't — it's completely on them. So you can't fix it for them, right?

36:33
So to be strong through that. And also just to really to enjoy watching them play and make sure that this is for them and not for you has been kind of the successful part of all of this and what has really made it an amazing journey. And I wouldn't have changed any of it.

Amy Laburda
Yeah. Awesome. Well, thank you so much, Rebecca. It was great talking to you today. And I know that, as Mac's softball season progresses, I will be pulling for her. All our colleagues here at Palisades Hudson will too. So I hope she has a great season coming up.

Rebecca Pavese
Great. Thanks, Amy.

Amy Laburda 37:04
“Something Personal” is a production of Palisades Hudson Financial Group, a financial planning and investment firm headquartered in South Florida. Our other offices are in Atlanta; Austin; the Portland, Oregon metropolitan area; and the New York City metro area. “Something Personal” is hosted by me: Amy Laburda.

37:23
Our producers are Ali Elkin and Joseph Ranghelli. Joseph Ranghelli is also our director, editor and mixer. If you enjoyed this podcast, please take a moment to rate and review us wherever you're listening. It's a simple way to help new listeners find the show, and we really do appreciate it. Thank you.