A detailed view of the NFL Shield logo paint on the field during a preseason game between the Los Angeles Rams and Houston Texans at NRG Stadium on August 24, 2024 in Houston, Texas.
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Sports team owners who profit from soaring team values are also facing new pressures from two of the oldest certainties about wealth in America: death and taxes.
As the average age of team owners rises and team values soar into the billions of dollars, owners and the league are increasingly focused on how to ensure a smooth transition of ownership to the next generation of buyers. Today’s owners have highly sophisticated tax and succession plans, but even the best plans can be derailed by family disputes or unexpected tax changes.
“People who bought sports teams a long time ago realized that a large part, maybe even a large part, of their long-term assets were in the value of the team,” said Stephen Amder, co-leader of Pillsbury Winthrop Shaw Pittman’s mergers and acquisitions and private equity practice, who advises many billionaire team owners. “They’re thinking a lot about who’s going to pass the team on to the next generation and how they’re going to do it.”
Succession and taxes have become especially important in the National Football League as the average age of team owners exceeds 72 and team values have skyrocketed. CNBC’s Official NFL Team Values List for 2024, ranking all 32 professional franchises, will be released on Thursday.
NFL owners face one of two tough choices: sell their teams while they’re still alive, which could trigger huge capital gains taxes, or give them to family members, which could trigger estate taxes and long-running family control battles.
Former Denver Broncos owner Pat Bowlen created a detailed succession and tax plan for the team 10 years before his death in 2019. But bitter family disputes arose before and after his death, leading to the team being sold in 2022. Walmart Heir Rob Walton bought it for $4.65 billion.
Then-owner of the Tennessee Titans, Bud Adams, signs autographs during a preseason game against the Minnesota Vikings at LP Field in Nashville, Tennessee on August 13, 2011.
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Tennessee Titans founder Bud Adams, who died in October 2013, thought splitting ownership of the team between the three branches of his family would keep the peace, but the split sparked a very public battle over ownership that ultimately led to an intrafamily settlement, with Bud’s daughter, Amy Adams Strunk, now at the helm of the team.
Longtime New Orleans Saints owner Tom Benson sparked years of litigation when he left his daughter and two grandchildren out of his estate and transferred ownership of the NFL team and the New Orleans Pelicans of the National Basketball Association to his wife, Gayle, when he died in 2018. He still controls the Saints.
Then-New Orleans Saints owner Tom Benson and his wife Gayle before a game at the Mercedes-Benz Superdome in New Orleans, Louisiana on August 26, 2016.
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And perhaps the NFL’s most poignant cautionary tale is that of legendary Miami Dolphins owner Joe Robbie, who left the team to his wife and nine children when he died in 1990. Family feuds and an estate tax bill that exceeded $45 million forced his family to sell most of the team in 1994.
Current U.S. tax law imposes a 40% tax on estates over $13.6 million for individuals and $27.2 million for couples. With NFL and NBA teams currently worth billions of dollars, without proper planning, all team owners could be on the hook for hundreds of millions of dollars in taxes.
Another issue is that the current estate tax rates expire in 2025, and it’s unclear whether they will change at that point, so owners need to prepare for the possibility of tougher estate taxes in the coming years.
Trust and estate lawyers say team owners today have a much broader set of tools at their disposal to minimize the tax impact of an inheritance. One of the most popular is the family limited partnership, which gives family members minority ownership and leaves control to the general partner, the majority owner. By splitting ownership, the partnership can lower the value of the general partner’s assets (and therefore the value of the estate subject to tax).
Owners can also split ownership among family members through separate trusts, as Chicago Bears owner George “Papa Bear” Halas Sr. did with his 13 grandchildren, or transfer the team’s interests into an irrevocable trust through a partnership or LLC.
Chicago Bears coach George Halas watches his team play against the Los Angeles Rams at the Coliseum on Nov. 2, 1958.
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“Owners are spending a lot of time thinking ahead about their long-term estate planning to ensure they get the most tax-efficient outcome possible,” Amdar said.
Of course, this assumes that the team remains family-owned: Owners often want to pass on their passion and financial involvement in the team to their children, but the next generation often has different interests and financial goals, which may mean relinquishing some ownership of the team.
And now there’s a new buyer in the mix.
The NFL voted last week to allow select private equity firms to buy minority stakes in teams, giving owners and their families the opportunity to withdraw cash and reinvest it in the team or invest in non-sports assets to better diversify while still retaining control.
“I believe it’s appropriate to provide our teams with liquidity and allow them to reinvest in our sport and our teams,” NFL Commissioner Roger Goodell said in the announcement.
