NFL Owners Face a New Challenge: Passing the Baton (And the Billion-Dollar Team)
As the average age of NFL team owners continues to rise, alongside skyrocketing team values, the question of succession planning is taking center stage. With billion-dollar stakes on the line, owners are grappling with the complex realities of estate taxes and ensuring smooth ownership transitions to the next generation, facing the dual pressures of death and taxes.
Key Takeaways:
- Booming team values and aging owners are making succession planning paramount for owners who want to ensure their legacy and shield their families from significant tax burdens.
- The delicate balance between selling versus passing down ownership presents owners with difficult choices. Selling can trigger massive capital gains taxes, while passing ownership can lead to estate taxes or potentially bitter family disputes.
- Private equity investment in NFL teams adds a new dimension to ownership transfer, as owners can now tap into liquidity without ceding full control.
A Legacy of Billion-Dollar Challenges
The current generation of NFL owners, often men who bought teams decades ago for a fraction of their current value, are now confronting the reality of passing down their billion-dollar assets.
"The people who bought sports teams a long time ago have now found that a large portion, if not a vast majority, of their long-term estate is now the value of the team, " says Stephen Amdur, a lawyer specializing in advising billionaire sports team owners. "They’re thinking a lot about who is going to hold it for the next generation and what they’re going to do with it."
The High Stakes of Succession
The NFL, with the average owner age above 72, is a prime example of this generational shift. The estate tax threshold for individuals sits at $13.6 million, meaning any estate exceeding that amount is subject to a 40% tax. With NFL teams routinely valued in the billions, owners could face hundreds of millions in taxes without proper planning.
The challenges are evident in past cases:
The Denver Broncos: Former owner Pat Bowlen’s meticulous succession plan was overshadowed by a bitter family dispute, ultimately leading to the team’s sale to Walmart heir, Rob Walton, for $4.65 billion.
The Tennessee Titans: Founder Bud Adams, who divided ownership among his family, set the stage for a public power struggle that ultimately led to his daughter, Amy Adams Strunk, taking control.
The New Orleans Saints: Owner Tom Benson’s decision to transfer ownership to his wife Gayle after his death sparked years of litigation with family members.
The Miami Dolphins: Owner Joe Robbie’s legacy was marked by family feuds and estate taxes that forced the family to sell a majority of the team.
Navigating the Tax Landscape
Attorneys specializing in trust and estate planning highlight the importance of proactive strategies to mitigate the tax impact of succession.
Family limited partnerships are one popular method. This structure establishes minority ownership for family members while granting the primary owner, as the general partner, control. By dividing ownership, this strategy can lower the value of assets and subsequently reduce the taxable estate.
Other options include:
- Individual trusts: As seen in the case of George Halas Sr. and the Chicago Bears, owners can distribute ownership to family members through separate individual trusts.
- Irrevocable trusts: Owners can transfer ownership to irrevocable trusts through partnerships or LLCs, offering tax advantages.
The rise of private equity investment provides owners with a new avenue to navigate succession. This option allows owners to cash out a portion of their stake without losing control, giving them greater flexibility for reinvestment in their team or in diverse assets. This approach could appeal to families who are interested in retaining ownership but seeking liquidity to ensure long-term financial security.
A New Era of Ownership
The changing landscape of NFL ownership reflects the growing need for innovative strategies to ensure the enduring legacy of teams that have captivated generations of fans. As owners navigate the delicate balance between family, finances, and the enduring love for a cherished franchise, we are likely to witness further evolution in the way these billion-dollar teams are transferred to the next chapter. The future of NFL ownership is poised to be shaped not just by the stars on the field, but by the careful maneuvers of seasoned owners and the aspirations of the next generation vying for a place in the heart of the American game.
