Sports team owners are currently facing a unique set of challenges as team values continue to soar and the average age of owners increases. The pressure to navigate through tax implications and ensure a smooth ownership transition to the next generation is becoming more prevalent in the sports industry.
In the National Football League (NFL), the average age of team owners is now over 72, and team values are reaching unprecedented levels. Owners are grappling with the decision to either sell the team during their lifetime, leading to significant capital gains taxes, or pass it on to their families, potentially triggering estate taxes and family disputes.
Several examples highlight the challenges faced by NFL team owners in planning for succession. Former Denver Broncos owner Pat Bowlen’s detailed succession and tax plan could not prevent a bitter family dispute that ultimately led to the sale of the team. Tennessee Titans founder Bud Adams split ownership among family branches, resulting in a public battle for control. New Orleans Saints owner Tom Benson faced litigation after excluding family members from his estate.
With current U.S. tax law imposing a 40% tax on estates over a certain threshold, NFL and NBA team owners are at risk of incurring substantial taxes without proper planning. The potential for estate tax rate changes in 2025 adds another layer of uncertainty for team owners.
Trust and estate attorneys suggest various strategies for sports team owners to minimize the tax impact of succession. Family limited partnerships, individual trusts, and irrevocable trusts can help lower the taxable estate value and ensure a more tax-efficient outcome for future generations.
While owners may aspire to pass down their passion for the team to their children, differing interests and financial goals among the next generation could lead to the partial or complete sale of team ownership. The introduction of private equity firms as minority stakeholders in NFL teams offers owners liquidity to reinvest in their teams or diversify their investments.
As sports team owners grapple with succession planning and tax implications, the need for long-term estate planning has become increasingly crucial. Owners must consider the potential for changing tax laws and the diverse tools available to safeguard their team’s future. By adopting proactive strategies, owners can ensure a smoother transition of ownership and preserve the value of their teams for generations to come.
Sports team owners are facing a myriad of challenges in planning for succession, particularly in the NFL where team values are at an all-time high. By addressing tax implications, family dynamics, and utilizing effective estate planning tools, owners can navigate through these challenges and secure the legacy of their teams for years to come.
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