Might Cliff Lee Manage To Keep It-All If He Divorced In Nyc?

December can be an interesting month for sports fans, especially Ny sports fans. The area's soccer squads are both bidding for playoff berths; basketball and tennis enthusiasts are settling in with mixed thoughts about their team's early functionality; and major league baseball's "hot stove" league is a buzz with the potential of free agent signings.This year's greatest baseball free agent star is pitcher Cliff Lee. And to no surprise the New York Yankees are on the list of few teams bidding for his love. The Angels, Rangers, and Yankees have all reportedly "pitched" Cliff Lee and have provided him a king's ransom to play due to their staff. All the three teams dating Mr. Lee has different things to supply. Florida has lovely weather; Texas has no state incometax; and New York has a chance to earn millions of dollars above a baseball commitment in endorsements and sponsorships. There is little question that along with his broker, family, and friends Mr. Lee gets lots of advice from a variety of advertising, legal, and tax professionals.Even though I've not been questioned, I thought I'd offer my two-cents to Mr. Leeis dilemma. Ledge, stay away from New-York. Maybe it's your fiscal ruin.Assume Cliff Lee signs with the Yankees for seven years at $25 million per year and agreements for yet another $5 million per year for marketing. It doesn't take a forensic accountant to estimate that during the next seven years he will earn $210 million. But presume Lee, A-Rod, and Jeter venture out one-night to celebrate a large make an impression on their arch-rivals, the Boston Red Sox. We all understand that Alex Rodriguez and Derek Jeter are magnets for gorgeous females. And only imagine Cliff Lee chooses quickly thereafter that he would be happier living like a bachelor in Nyc. Unlike any other state in the union, New-York State gives equitable circulation for the enhanced earnings capacity obtained during marriage; an idea that the future ex-Mrs. Lee may briefly learn.The enhanced earnings capacity (frequently known as EEC) is computed while the present value of the enlargement in earnings over an expected work-life. In Lee's case, this span could expand within the next seven years of his new contract and might proceed for several years thereafter, if he must be luckily enough to become a mentor, commentator, or tv expert after his playing days are over.The approach to calculating the improved earnings potential in New York State was established in 1985 as a result of the New York Appellate Court's decision in O'Brien v. O'Brien. This idea was later reaffirmed in 1995 in the Ny Court's determination in McSparron v. McSparron; in addition to a great many other scenarios that used. The technique employed to the calculationspecific to Cliff Lee could be broken-down into five steps:1. Establish Cliff Leeis profits potential in the graduation of the theoretical divorce action, resulting from signing with the NY Yankees. This can be called top line Profits. 2. Ascertain Cliff Lee's profits volume if he'd continued the job path and not become a hockey phenom chosen at the time of union. That is called base line Earnings. 3. Estimate the after-tax profits of the Most Truly Effective- Line and Foundation -Line portions by making use of federal, state and local income tax rates, along with the social security and medicare tax. 4. The distinction involving the net after-tax earnings of every earnings platform could be the net enhanced earnings capacity owing to his record setting contract. 5. Estimate today's value of the net enhanced earnings capacity over his NY Yankee contract.For illustrative purposes, let's assume that Ledge Lee had a bachelor's degree during the time of union. Let's further assume that a white man with a bachelor's degree, surviving in Nyc at Mr. Lee's current age could earn $125,000 per year. Here is the volume thought to be a proxy for Base-Line earnings.The following table illustrates the after-tax earnings of both the Top- Base and line -Line quantities; in addition to the yearly online superior earnings ability. Leading-Line Earnings Base-Line Earnings Pre-Tax Earnings 30,000,000 125,000 (-) Fica/Medicare -441,622 -8,434 (-) Federal Income Taxes -9,256,731 -24,333 (-) Condition/Area Income Taxes -3,784,335 -12,019 Net After Tax Earnings 16,517,312 80,214 Net Enhanced Earnings Potential 16,437,098A current value discount rate was created to reflect the value of profit a relatively risk free investment. Financial analysts, economists and accountants generally concur that the true rate of interest is between 2% and 4%. % have been historically accepted have by the courts whilst the current worth factor applied in this calculation; however in recent cases have regarded prices between 5% and 10%. The present value discount price is essential. While the present value discount factor increases, the sum total enhanced earnings calculation decreases.Based upon these calculations, the enhanced earnings capacity related to Cliff Leeis prospective seven year deal with the NY Yankees is $102 Trillion (Spherical). The following table shows this computation.Year Net Improved Earnings Ability Present Value Discount Factor @ 3% Internet Present Value 1 16,437,098 0.97087 15,958,348 2 16,437,098 0.94260 15,493,541 3 16,437,098 0. 91514 15,042,273 4 16,437,098 0.88849 14,604,149 5 16,437,098 0.86261 14,178,785 6 16,437,098 0.83748 13,765,811 7 16,437,098 0.81309 13,364,865 Total 102,407,772Since Newyork can be an equitable distribution State, a percentage with this sum would participate in his soon-to be-ex-spouse. In some instances the courts have granted around a 50% share and in others less than 10%.As you can imagine, there are a variety of points Cliff Lee must consider when deciding next year which mound to contact home. Can he flourish in the Florida sunshine; the expertise of Florida Gonow X Space; or the cement jungle of New York City. Only time will tell. But what we do know is this - getting separated in New York State after signing a record setting free-agent deal could possibly be more unpleasant than losing on the planet Series for the San Francisco Giants.For more information about the computation and application of the enhanced earnings capacity calculation, including our Enhanced Earnings Capacity Survey, please visit our website.