Professional athletes can no longer limit their prenuptial agreements to cover the traditional assets of houses, bank accounts, investments, and retirement benefits.

Why? Because today’s pro athlete is a business enterprise in his or her own right.

NBA, NFL, MLB, and other professional athletes can earn enormous sums not only from their playing contracts, but also from endorsements, licensing arrangements, social-media platforms, appearances, podcasts, production companies, intellectual property, and other commercial ventures. In many cases, an athlete's off-field income can ultimately rival or exceed compensation from the sport itself.

This expanded view of what constitutes “assets” creates a particularly complicated issue in a divorce: When does income belong to the athlete individually, and when does it become marital property?

Under New York law, the starting point for asset acquisition is significant. Domestic Relations Law § 236 generally defines marital property as property acquired by either spouse during the marriage, regardless of title, while separate property includes property acquired before marriage and the increase in value of separate property, subject to the statutory exception for appreciation attributable to the other spouse's contributions or efforts. 

A well-drafted prenup can modify that statutory framework. Indeed, New York expressly permits spouses to characterize property as separate by written agreement. 

For professional athletes, one of the most important provisions should therefore address endorsement, NIL, licensing, and other brand-related income with extraordinary specificity.

How Do You Address Premarital Endorsements?

Consider an athlete who signs a five-year endorsement agreement before getting married.

The contract may be worth $10 million, but the athlete receives payments over five years—three of which occur during the marriage.

Simply stating that the endorsement agreement was signed before marriage may not adequately resolve every characterization issue.

The prenup should expressly address:
•    the contract itself;
•    compensation payable under the contract;
•    bonuses;
•    royalties;
•    residuals;
•    renewal payments;
•    licensing fees;
•    deferred compensation;
•    equity received instead of cash;
•    products or stock received as compensation; and
•    payments received after divorce.

The parties should also specify whether the entire economic interest arising from the premarital contract remains separate, notwithstanding the fact that payments are received during the marriage.

That distinction is critical.

A sophisticated agreement might provide that an endorsement agreement executed before marriage, together with all compensation and other consideration arising from that agreement, remains the athlete's separate property—even if the athlete performs promotional services during the marriage.

Without such language, the parties may find themselves litigating the extent to which compensation received during the marriage constitutes marital property.

What to Know About a New Endorsement Deal Signed During the Marriage

The analysis becomes even more important when the athlete signs a new endorsement agreement after the wedding.

Absent a contrary agreement, New York's statutory framework generally treats property acquired during the marriage as marital property. Thus, a $20 million endorsement agreement signed during the marriage could potentially create a substantial marital asset.

But there are several different components to consider.

Suppose the athlete signs a three-year agreement during the marriage:
•    $3 million signing payment;
•    $3 million annual compensation;
•    $2 million performance bonus;
•    equity in the sponsoring company; and
•    royalties continuing after termination.

The prenup should not simply say that "endorsement income is separate." It should identify each category of economic interest and establish how it will be characterized.

What About Post-Divorce Payments?

Payments received after the divorce is one of the most frequently overlooked issues.

Imagine an athlete performs under an endorsement agreement during the marriage but receives a $5 million payment six months after the divorce.

Is that $5 million:
A: Separate property because it was received after the marriage ended? Or
B: Marital property because it represents compensation for services performed during the marriage?

The answer can depend upon the nature of the payment, the underlying contract, and the applicable law.

A sophisticated prenup should therefore address the timing and source of compensation, rather than relying exclusively on the date the money enters the athlete's bank account. The agreement should distinguish between:
•    the date the contract was executed;
•    the period during which services were performed;
•    the date compensation was earned;
•    the date compensation became payable; and
•    the date compensation was actually received.

Those are not necessarily the same date.

For an athlete earning millions of dollars annually from multiple commercial relationships, that distinction can become enormously consequential.

The Athlete's Name, Image, and Likeness (NIL) Opportunities

The growth of NIL opportunities has made this issue even more complicated. An athlete's name, image, and likeness can generate revenue through:
•    sponsorships;
•    social-media campaigns;
•    licensing;
•    appearances;
•    merchandise;
•    video games;
•    trading cards;
•    digital content;
•    podcasts;
•    YouTube;
•    personal brands;
•    production companies; and
•    other intellectual-property arrangements.

A prenup should define precisely what constitutes the athlete's NIL and who owns the economic rights associated with it. That is particularly important because the personal identity of the athlete cannot necessarily be separated neatly from the commercial enterprise built around that identity.

A spouse may argue that the brand's value increased dramatically during the marriage because of the marital partnership, the spouse's contributions, or the spouse's assistance with the athlete's business.

The athlete, on the other hand, may argue that the value derives from his or her preexisting fame, athletic ability, and individual labor.

The agreement should attempt to resolve that dispute before it occurs.

What About the Spouse’s Contributions to the Brand?

This is where New York law becomes particularly interesting.

New York recognizes that appreciation of separate property can become subject to equitable distribution to the extent the appreciation is attributable to the other spouse's contributions or efforts. The Court of Appeals has emphasized that New York's equitable-distribution law recognizes both direct and indirect contributions to the marital economic partnership. 

Consequently, an athlete's prenup should address whether the spouse's assistance with the athlete's career or brand creates an economic interest. For example, what happens if the spouse:
•    attends endorsement meetings;
•    helps manage social media;
•    introduces the athlete to business contacts;
•    participates in advertising campaigns;
•    manages household responsibilities while the athlete travels;
•    helps develop a clothing line;
•    provides business advice;
•    entertains sponsors;
•    assists with charitable ventures; or
•    performs other services that arguably enhance the athlete's brand?

These questions should not be left to a divorce court to resolve years later. The prenup should expressly define whether such activities constitute contributions giving rise to a claim against the athlete's separate business or intellectual property.

The Athlete's Brand Versus the Athlete's Business

Another important distinction is between the athlete personally and a company owned by the athlete. Suppose an athlete creates an LLC before marriage that owns a clothing brand. 

The prenup should distinguish between:
•    the athlete's personal name, image, and likeness (NIL);
•    the LLC;
•    trademarks owned by the LLC;
•    licensing agreements;
•    endorsement contracts;
•    intellectual property;
•    cash and investments held by the company; and
•    appreciation in the value of the business.

That distinction matters because the company may have a value independent of the athlete's personal earning capacity. So, the agreement should establish whether that business—and its appreciation—remains separate.

The New Celebrity Divorce Issue: Digital Assets

The agreement should also address digital property. That includes:
•    Instagram accounts;
•    TikTok accounts;
•    YouTube channels;
•    podcasts;
•    websites;
•    domain names;
•    digital advertising revenue;
•    subscriber databases;
•    digital content libraries;
•    trademarks;
•    photographs;
•    videos;
•    licensing rights; and
•    monetization arrangements.

The question isn't simply who gets the Instagram account. It is who owns the economic value generated by that account. A prenup should establish that distinction.

Drafting Prenuptial Agreements Around the Athlete's Entire Commercial Life—A Look Into the Future 

For a professional athlete, I would want the prenup to define "Athlete Business Interests" broadly enough to encompass:
•    all endorsement agreements;
•    sponsorship agreements; 
•    licensing agreements; 
•    NIL arrangements; 
•    appearance agreements;
•    media agreements;
•    intellectual property; 
•    trademarks; 
•    copyrights; 
•    social media accounts;
•    digital platforms; 
•    business entities; 
•    royalties;
•    residuals; 
•    equity interests; 
•    deferred compensation; and 
•    other economic opportunities arising from or relating to the Athlete's name, image, likeness, athletic career, or personal brand.

The agreement should then specify exactly what happens to each category before, during, and after the marriage.

What’s the Bottom Line for Prenuptial Agreements?

Pay attention to the details. The fundamental error in drafting an athlete's prenup is to think only about the money the athlete has when the parties get married.

The more important issue is often: How will the prenuptial agreement characterize the hundreds of millions of dollars in economic opportunities that the athlete's career and personal brand may generate over the next decade?

For a professional athlete, the prenup should therefore function less like a static inventory of premarital assets and more like a road map for the athlete's entire economic life.

The best athlete prenup anticipates the divorce that hopefully never happens. It answers the difficult questions about endorsements, NIL, deferred compensation, intellectual property, brand appreciation, and post-divorce payments before those questions become seven-figure litigation issues.

If you have questions about how best to structure a prenup for yourself or a client, feel free to connect directly with Atty here: akb@gdblaw.com.