Mike Scully - Managing Director at Baycrest Consultants shares their plan to help Universities dealing with their Coach's Buyouts!
Mike Scully - Managing Director at Baycrest Consultants shares their plan to help Universities dealing with their Coach's Buyouts!
Coach Buyout Scenario in the Endless Money Loop for Power 4 Coach
Here’s an illustrative outline of how a Power 4 school could deploy on a coaches $40.5 million buyout through the “Endless Money Loop” instead of an immediate cash‐out expense.
1. Structure the Buyout as a Loan in the Endless Money Loop
• Rather than writing a $40.5 million check within 60 days, the university and coach agree in writing to treat the entire buyout into the Endless Money Loop as a “loan” from university to the coach.
• This deferral converts what would be a P&L expense into a balance-sheet receivable asset.
2. Purchase a Split-Dollar Life Insurance Policy
• University immediately contributes the $40.5 million loan proceeds as premiums into a corporate‐owned, participating whole‐life policy on Coaches life.
• Under a split-dollar agreement, the university retains rights to premium recovery and a share of the death benefit; the coach gets access to policy cash value and the remainder of any death benefit.
• University recoups 100% of buyout in 15 years or on passing of the coach, instead of dollars leaving balance sheet forever.
• Coach can access a portion of that cash value tax-free after the first 90 days if he chooses.
3. University’s Asset Recovery
• On coach passing (or at the end of a pre-agreed term, e.g., 15 years post-buyout), the policy’s death benefit is paid out.
• University recovers its original $40.5 million “loan” out of the death benefit first, plus any unfunded interest credit—as contractually specified—before any remainder passes to Coach’s beneficiaries.
• If coach were to die earlier, the university recovers its full principal more quickly; if later, the policy’s growth enhances the university’s net recovery in 15 years above the original $40.5 million.
4. Financial Impacts & Benefits
• For University: No immediate $40.5 million cash‐out; the buyout becomes a long-term asset that grows on the university’s balance sheet.
Offsets—or even eliminates—the lump‐sum budgeting shock and may help avoid or reduce excise taxes on high-compensation payments.
• For Coach: Deferred income avoids a large tax bill in the year of termination.
Provides optional liquidity: tax-free policy loans or withdrawals after 90 days, giving him flexibility for new career opportunities or personal needs.
Long-term retirement asset with death‐benefit protection for his heirs on any residual value.
5. Summary
By rolling his $40.5 million buyout into the Endless Money Loop, the university would transform a six-figure near-term liability into a multi-million-dollar, tax-efficient asset. Coach gains optional tax-free liquidity and retirement funding, while the university recoups its outlay over time—potentially with investment upside—rather than simply writing a large check on day 61.
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