ELITE ADVISOR BEST PRACTICES

Income Disability Protection for Your High-Profile Clients

Case study: Recent divorce of Yankees GM Brian Cashman

By Ted Tefaro

Key Takeaways:

  • Your high-income clients may be highly exposed on two fronts if they become disabled: loss of their own incomes and negative impact on their businesses’ success.
  • High-limit disability insurance can protect high-performing professionals above and beyond what traditional disability income carriers will underwrite.
  • Key-person disability insurance provides benefits to protect a company or organization from financial hardship that may result from the loss of a key employee due to disability.


This is the time of year that optimism tends to run high in many parts of Florida and Arizona. That’s because baseball spring training is in full swing. Scores of hungry rookies are hopeful of making the Major League roster. Flocks of injured veterans are willing their aging bodies into one final comeback run. And every team in the league starts with the same record and hopes of making the playoffs.

However, despite a huge payroll and star-studded roster, things are less sunny in Tampa, home to the 27-time world champion New York Yankees. And it’s not just due to worries about the health of aging stars Mariano Rivera and Derek Jeter.

Longtime Yankee General Manager Brian Cashman recently settled a very costly divorce. In addition to being distracting from his duties to the team, we wonder, what would happen to Cashman’s ability to pay his ex the monthly settlement amount should he become disabled and unable to perform his occupational duties?

Cashman, who earns $3 million a year, will be paying $1 million a year in alimony and child support to his now-ex-wife, Mary Bresnan, under the divorce settlement. Cashman, 45, also has agreed to keep Bresnan as the beneficiary of a life insurance policy on him in the amount of $2.25 million until her remarriage, death or Oct. 31, 2025, whichever comes first.

Bresnan will owe income taxes on the payments, and Cashman can claim them as a deduction, court records state.

Within the next three months, Cashman must apply for a new term life insurance policy with a $2.75 million benefit and list the 42-year-old mother of his two children as the sole beneficiary under the same conditions as the other policy. But he will be allowed to reduce the value of the new policy’s benefit by $200,000 each year.

In sports world, team execs don’t get same protection as athletes

While Alex “A-Rod” Rodriguez’s contract is guaranteed, as are those signed by most other Major League Baseball players, we wonder if the same is true for the Yankee GM? If Cashman were to become disabled and his contract not guaranteed, we think the last place he wants to be while recovering is in court fighting to reduce the amount of support.

What about your best clients outside sports and entertainment? Given the high divorce rates in those rarified fields, how protected are they? If they have settlement agreements due to divorce, are they protected should they be temporarily or permanently disabled?

Solution

To protect your best clients, write a disability income protection policy that covers some or all of the contractual obligations caused by a divorce. Contact divorce attorneys and discuss the concept. They will be impressed with a fresh idea.


About the Author

Edward A. (Ted) Tafaro, president & CEO of Mahwah, New Jersey-based Exceptional Risk Advisors, is an expert on high-limit specialty life, accident and disability products for clients with extraordinary insurance needs, including celebrities, athletes, entertainers, highly compensated executives and professionals. By partnering with Lloyd’s of London syndicates, his firm manages some of the largest binding authorities available in the United States for these specialty programs. For more information, contact him at 201-512-0110 or ted.tafaro@exceptionalriskadvisors.com.