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Greatest (Estate Plan) of All Time?
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Did Muhammad Ali Leave The Greatest $50 Million Estate Plan Of All Time?

Originally published by TrustAdvisor [link] on June 06, 2016

Across his entire boxing career, Muhammad Ali probably didn’t even earn a fifth of Floyd Mayweather takes home for one fight, but he died a hero to many with a reported $50 million in the bank to support his causes and make life better for his nine kids.

It’s an amazing conclusion for a man who came out of nothing in an age where even a colossus at his peak felt rich on a couple million dollars, barely worked a decade and didn’t even believe in accepting compound interest to stretch the cash a few points farther.

But the fact that the cash held up for decades of increasingly frail health and unpaid philanthropy means that unlike a lot of his contemporaries, Ali didn’t need to work himself into the grave even if that was an option.

That’s not only a win. It’s a knockout swing in the name of millions of humble working people who still want to believe in the power of traditional retirement planning.

Good enough for the Greatest


We’re seeing a generation of celebrities pass away who just didn’t benefit from today’s stratospheric earning prospects. The notion of a Humphrey Bogart of Mickey Rooney earning $75 million per role or Tiger Woods, Kobe Bryant and LeBron James pulling $60 million to $70 million a year would be unspeakable when Ali was coming up in the mid-1960s.

Today’s paychecks simply add up to 9 or 10 digits of wealth a lot more realistically than the paltry millions a heavyweight champion could bank on a title defense 50 years ago.

Back then, the only billionaires were towering titans of industry and it took generations. Now, quite a few hedge fund managers or Silicon Valley darlings can boost their net worth from zero into that range in a single tax year.

With that in mind, there’s no shame in Ali dying with “only” a reported $50 million to his name, even though that’s roughly what someone like George Clooney makes nowadays in a few years shooting coffee commercials.

Ali was paid beyond the top dollar in his era and kept cashing the checks in fight after fight as he transformed pro boxing into a career sport fit for kings. He was outspoken, flamboyant, controversial and always larger than life.

And what’s especially impressive here is that Ali earned about $57 million as a boxer and we have a pretty good idea that he had roughly that much left at the end, even though his last big fight was 35 years ago.

He didn’t spend everything down as fast as it came in. That’s critical here because we’re dealing with an athlete’s career trajectory here and not a Wall Street tycoon or film star who can stay bankable into the eighth or ninth decade.

When you’re washed up in sports, you’re done. For Ali, the really hot streak lasted from 1964 to 1981, with a four-year break while he settled the conscientious objector dispute.

Then the Parkinson’s started to set in and his big meal ticket was gone. If he’d been a banker, it would be like retiring before his 40th birthday because he had to, not out of any sense that he’d collected enough cash to fund the decades to follow.

Maybe the $57 million came close to running out over the decades of forced retirement, but Ali remained just enough of a showman to keep licensing the name and raking in income.

The important thing here is that it wasn’t “working” by his standards. He wasn’t getting paid big bucks for getting punched in the head.

Everything Ali made over the last 35 years of his life was relatively passive income. It fed on the cultural capital he’d built up when he was working his real job.

That’s the classic retirement proposition right there. It’s why middle-class retirees don’t cash everything out at once: you keep money working for you in the market, even though you no longer work for the money.

For Ali, the 401(k) was fully invested in fame. His name generated around $4 million a year in licensing fees decades after he stopped making headlines.

That’s the kind of passive income stream that helps your clients live comfortably without touching the principal unless they really need it. And that’s part of the value that the typical financial advisor adds.

Room for philanthropy


While Ali liked drama, it’s hard to imagine him getting addicted to more than a baseline level of comfort. Being part of a generation where $8 million is a lot of money, he didn’t go in for $100 million mansions.

He had a few nice houses in Arizona and Kentucky. They sold for maybe $5 million all in all, which again proves that people with a little money can still enjoy an extremely nice lifestyle without reaching unrealistically high.

They always say the optimum wealth level for happiness starts around $3 million. That’s what Ali was making and what his lifestyle was geared toward.

When he sold the majority interest in his publicity rights back in 2006, he’d already been retired a quarter century. It was like someone who pursued a
business career and quit at age 65 cashing out the nest egg at age 90 on the premise that life expectancy is probably running low at that point.

Cashing in funded a family trust that has probably smoothed his income needs over the last decade and will undoubtedly provide for his family now that he’s gone. We know that his brother is acting as executor of the estate and is probably a trustee as well.

Meanwhile, his share of the rights still earned him a healthy stipend and he no longer had to work quite so hard monetizing his fame – the various venture capitalists who took over did that for him in order to generate ROI for themselves.

Instead, he was free to focus on his charities: the museum dedicated to his legacy, his medical fund-raising activities, various little organizations around Kentucky.

Those aren’t big foundations. Maybe they circulate a couple of million dollars apiece, and since Ali took his conversion to Islam seriously, they can’t even keep their cash in interest-bearing checking accounts.

They’ll never be world-conquering behemoths like the Gates Foundation or whatever today’s stars end up creating. But they made a difference where Ali could see it when he was alive, and that’s probably the icing on the cake.