What To Consider Before Accepting an NIL Deal

An NIL Opportunity Arrived. Now What?

For many families, an NIL offer can be both exciting and unexpected. But not every opportunity is legitimate, and taking time to evaluate the details before making any commitments can help families avoid costly mistakes. Before focusing on the financial benefits, take a step back and assess the offer itself:

• Who is making the offer? Can they be verified through an established organization?
• Is the opportunity being presented through professional channels, or only through social media or informal communications?
• What are the terms and conditions of the agreement?
• Are expectations, timelines and compensation clearly documented?

For many families, this may be their first experience evaluating an agreement that resembles a business relationship. Your Baird Financial Advisor team can help connect you with the right professionals, such as attorneys, accountants and experienced NIL agents, and coordinate guidance throughout the process.

Know the Red Flags

The evolving NIL landscape has made it easier for bad actors to take advantage of aspiring athletes. Be wary of opportunities that:

• Ask for login credentials, banking information or payment upfront.
• Arrive only through social media or informal channels.
• Ask you to purchase a product with a promise of reimbursement later.
• Require you to pay shipping costs, “collaboration fees” or other expenses to participate.
• Pressure you to act immediately or sign before reviewing the agreement.

Legitimate NIL opportunities should clearly explain the expectations, compensation and terms of the arrangement. If something feels rushed, vague or overly complicated, pause and seek advice before moving forward.

Understand the Financial Implications

Once you've established that an opportunity is legitimate and assembled the right team, the next step is understanding what the arrangement could mean financially. For many student-athletes, NIL earnings may represent the first significant income they've ever received. While the opportunity can be exciting, it may also come with financial responsibilities that families haven't encountered before.

• Don't assume the full amount is yours to keep. One of the biggest gaps in student-athletes' understanding of NIL is taxation. While NIL income may arrive as a lump sum, a portion will likely be needed to satisfy tax obligations. Setting aside money before making major purchases can help families avoid finding themselves unprepared when tax obligations come due. NIL income is generally taxable, whether compensation is received as cash, merchandise, gift cards or other benefits.
• Consider whether a business structure makes sense. Student-athletes with meaningful NIL earnings may want to explore whether creating a business entity is appropriate for their situation. Beyond potential tax and administrative benefits, the right structure can also play a role in managing risk, creating clearer separation between personal and business finances and protecting assets as NIL activities grow.
• Short-term opportunities can affect long-term goals. A meaningful NIL opportunity may create new choices while also raising questions about your existing plans. Families may want to revisit education funding, savings goals, investment plans and other financial priorities to understand how this new source of income fits into their overall financial plan.

The broader lesson is that an NIL opportunity is more than a payment: It may be the start of financial decisions that can affect both current and future goals. Putting a thoughtful plan in place can help families understand their options, avoid costly mistakes and make the most of the opportunity.

Some NIL Income Doesn't Look Like Income

NIL compensation isn't always cash. The IRS generally considers many forms of NIL compensation to be taxable income, such as:

• Revenue-sharing payments from a college or university
• Payments for social media content or influencer activities
• Brand endorsement or promotional appearance fees
• Gift cards, product giveaways or other merchandise
• Services received in exchange for NIL activities, such as haircuts or other professional services

Keeping records of all forms of compensation can make tax reporting easier and help families understand how NIL earnings may affect financial aid and education funding decisions.

Put the Opportunity in Context

Once the immediate questions have been addressed, families can begin thinking about how NIL income fits into the athlete's broader financial future.

For some student-athletes, NIL income may help fund education expenses, reduce the need to draw on existing college savings or create opportunities to begin saving and investing earlier than they otherwise would. For others, the income may simply provide added flexibility as they pursue short- and long-term goals. Whatever the circumstances, it can be helpful to think of NIL income as part of a larger financial picture rather than a standalone event.

• Don’t treat NIL income like a permanent paycheck. NIL opportunities can change quickly, and future earnings may not be predictable. Building a plan around temporary income can help families avoid overcommitting to expenses that may be difficult to maintain later.
• Revisit existing education and savings plans. NIL money may create opportunities to adjust how education expenses are funded or how existing savings resources are used. It may also prompt families to reexamine priorities they established before the NIL opportunity existed.
• Balance today's needs with tomorrow's goals. While it may be tempting to spend NIL earnings immediately, families may want to consider how a portion of the income could support future objectives, whether that's education, savings, investing or other long-term priorities.
• Use the opportunity as a financial education moment. For many student-athletes, this may be the first time they're making decisions about meaningful income. Conversations about spending, saving, taxes and long-term goals can help establish habits that extend far beyond athletics.

An NIL agreement may last months, but the decisions made about that income can have implications for years. A thoughtful plan can help families align today's opportunity with the athlete's future goals and create value that lasts long after the agreement ends.

Questions To Discuss as a Family

An NIL opportunity can create new opportunities and raise new questions about how those earnings should fit into a family's broader plans:

• Should these earnings be spent, saved or invested?
• Could NIL income change existing plans for college savings or education funding?
• How much of this money should be set aside for future goals?
• Does this opportunity open the door to a potential career in athletics?
• What can this experience teach about managing money responsibly?

The answers will vary from family to family, but having these conversations early can help ensure NIL earnings support both immediate needs and long-term goals.

Looking Beyond the Opportunity

NIL opportunities can create meaningful possibilities for student-athletes and their families. They can also introduce financial decisions that many young people encounter years earlier than expected. Your Baird Financial Advisor team can help you understand the planning implications of an NIL opportunity and how it fits into your family's broader financial picture.

This information has been developed by a member of Baird Wealth Solutions Group, a team of wealth management specialists who provide support to Baird Financial Advisor teams. The information offered is provided to you for informational purposes only. Robert W. Baird & Co. Incorporated is not a legal or tax services provider, and you are strongly encouraged to seek the advice of the appropriate professional advisors before taking any action. The information reflected on this page is Baird expert opinion today and is subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor, and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.