A detailed view of the NFL Shield logo paint on the field during a preseason game between the Los Angeles Rams and the Houston Texans at NRG Stadium in Houston, Texas, on August 24, 2024.
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Sports team owners who have benefited from soaring team values are also facing new pressures from two of the oldest certainties of American wealth: death and taxes.
As the average age of team owners rises and team values soar into the billions, owners and the league are increasingly focused on ensuring a smooth transition of ownership to the next generation of buyers. Although today’s homeowners have highly sophisticated tax and inheritance plans, even the best plans can fall apart due to family disputes or unexpected tax changes.
“People who purchased sports teams long ago are now finding that a significant portion, if not the vast majority, of their long-term equity is now the value of the team,” said Stephen Amdur, head of M&A and co-owners. )explain. “They thought a lot about who was going to hold it for the next generation and what they were going to do with it.”
Inheritance and taxes have become particularly important in the National Football League, where the average age of team owners is now over 72 and team values have soared. CNBC will release its official 2024 NFL team valuation list on Thursday, ranking all 32 professional teams.
NFL owners face one of two painful choices: They can sell the team while it’s still alive, which could incur a huge capital gains tax bill, or they can pass the team on to their family members, which could trigger estate taxes or a long-running battle for control of the family.
Former Denver Broncos owner Pat Bowlen created detailed succession and tax plans for the team a decade before his death in 2019. Leading to the sale of the team in 2022 to Walmart Heir to Rob Walton, worth $4.65 billion.
Tennessee Titans then-owner Bud Adams signs autographs during a preseason game against the Minnesota Vikings at LP Field on August 13, 2011 in Nashville, Tennessee.
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Tennessee Titans founder Bud Adams, who died in October 2013, divided ownership of the team among the three branches of his family, believing it would keep peace. Instead, the split sparked a highly public battle for control that ultimately led to an agreement within the family. Bud’s daughter, Amy Adams Strunk, is now the team’s controlling owner.
Longtime New Orleans Saints owner Tom Benson took his daughter and two grandchildren from his estate, leaving the NFL team and the National Basketball Association New Orleans Pelicans after his death in 2018 Ownership was transferred to his wife, Gayle, triggering years of litigation.
On August 26, 2016, New Orleans, Louisiana, then-New Orleans Saints owner Tom Benson and his wife Gayle watched a game at the Mercedes-Benz Superdome.
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Perhaps the most poignant cautionary tale in the NFL is that of legendary Miami Dolphins owner Joe Robbie, who left the team to his wife and nine children when he died in 1990. A $10,000 estate tax forced the family to sell a majority stake in the team in 1994.
Under current U.S. tax law, estates exceeding $13.6 million for an individual or $27.2 million for a couple are subject to a 40% tax. Since NFL and NBA teams are now worth billions of dollars, without proper planning, all team owners could be on the hook for hundreds of millions of dollars in taxes.
Another problem: It’s unclear whether estate tax rates will change in 2025, when current levels are set to expire. Therefore, owners must prepare for the possibility of more punitive estate taxes in the coming years.
Today’s team owners have a wider range of tools at their disposal to minimize the tax impact of an inheritance, trusts and estate attorneys say. One of the most popular is the family limited partnership, which makes family members minority shareholders and gives the principal owner, as the general partner, control. By dividing ownership, a partnership can reduce the value of the general partner’s assets (and thereby reduce the value of the taxable property).
Owners can also distribute ownership to family members through personal trusts, as Chicago Bears owner George “Papa Bear” Halas Sr. has done with his 13 grandchildren . They can also transfer the group’s interest into an irrevocable trust through a partnership or limited liability company.
On November 2, 1958, Chicago Bears coach George Halas watched his team play the Los Angeles Rams at the Coliseum.
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“Owners are spending more time on the front end thinking about long-term estate planning to ensure the most tax-efficient outcome possible,” Amdur said.
Of course, that’s assuming the team stays in the family. While owners often want to pass on a passion and financial commitment to the team to their children, the next generation often has different interests or financial goals, which may mean giving up some team ownership.
Now there is a new group of potential buyers.
The NFL voted last week to allow some private equity firms to buy minority stakes in teams, giving owners and their families the chance to withdraw cash that can then be reinvested in the team or invested in non-sports assets to better diversify — —while maintaining control.
“I think it’s the appropriate thing to do to provide teams with liquidity to reinvest in the game and their teams,” NFL Commissioner Roger Goodell said in making the announcement.
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