Taking a Look at Dead Money

dead moneyWhat is dead money?

Once an NFL player signs a contract, the team he agreed with cannot release him down the road in an effort to save money. Instead, if the organization does cut the individual, it will have to satisfy the remaining terms of the contract with “dead” money.

Dead money comes up often when a player is expected to be, or is, cut from a team. Colin Kaepernick’s current situation with the San Francisco 49ers, for example, could end up with the team owing him dead money to satisfy his salary cap hit once he is released, if that is the route the team chooses to go. Various news outlets have reported the 49ers are deciding whether to cut the quarterback – who was recently placed on season-ending injured reserve – prior to next season. If it does, it will owe him $7 million in dead money.

How much dead money is owed to the player?

There is a formula that can be used to calculate the total amount of dead money a team owes a player. To determine the figure, one must determine the amount that the player has been paid as well as the total guaranteed money the individual still has left on his contract. These two amounts should then be added together. Next, take the resulting number and subtract the player’s total cap hit. The final figure will be the player’s dead money.

Teams will typically plan a release around when dead money is at its lowest, so that they do not have to allocate too much to a player no longer on the roster. However, in some situations, teams will bite the bullet and follow through with the cut.

To learn more about dead money, consult an experienced sports law attorney with knowledge of contracts and salary caps.

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Anthony R. Caruso is a business transactional attorney in New York and New Jersey with experience in structuring, negotiation and completion of legal deals involving business, entrepreneurs, athletes and performers.

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