As the values of professional sports teams soar, owners are facing increased pressure from two enduring aspects of wealth management: taxes and succession planning.
With the average age of team owners climbing and valuations reaching new heights, there is a growing focus on ensuring smooth transitions of ownership to future generations.
The National Football League (NFL) is particularly affected by these concerns. The average age of NFL team owners is now over 72, and team values have surged, with the average franchise valued at $6.49 billion. The challenge for these owners is deciding whether to sell the team during their lifetime, which can lead to substantial capital gains tax liabilities, or to pass it on to family members, potentially triggering estate taxes and causing family disputes.
Former Denver Broncos owner Pat Bowlen, who passed away in 2019, had created a detailed succession plan, but family disputes led to the team being sold in 2022 for $4.65 billion.
Similarly, Tennessee Titans founder Bud Adams’s attempt to divide ownership among his family led to a public battle over control, eventually resulting in his daughter Amy Adams Strunk becoming the controlling owner.
New Orleans Saints owner Tom Benson’s decision to pass ownership to his wife Gayle, excluding his daughter and grandchildren, resulted in years of litigation before his death in 2018. His wife continues to control the team. The case of Miami Dolphins founder Joe Robbie, who left the team to his wife and nine children, further underscores the risks, as a family feud and estate taxes forced the sale of a majority of the team in 1994.
Under current U.S. tax law, estates exceeding $13.6 million for individuals or $27.2 million for couples are subject to a 40% tax. With team valuations now in the billions, owners could face substantial tax liabilities without careful planning. Additionally, potential changes in estate tax rates set to expire in 2025 add further uncertainty.
Today’s team owners have access to various tools to mitigate tax impacts, such as family limited partnerships, which allow primary owners to maintain control while reducing the taxable estate’s value. Owners can also use individual trusts or irrevocable trusts through partnerships or LLCs to manage ownership and tax implications.
The NFL recently introduced a new option for team owners by allowing select private equity firms to acquire minority stakes in teams. This move provides owners with liquidity that can be reinvested in their teams or used for diversification while maintaining control.
NFL Commissioner Roger Goodell supported the change, noting its potential to benefit teams and their owners.