InsuranceNewsNet Magazine May 2011 : Page 19

THE LUCKIEST ESTATE PLAN EVER | FEATURE Chances are good the family would have had to sell the team. Now, Kaufman said, the absence of the estate tax means the family does not have to sell but it also might mean the family would not be able to sell it in the future without taking a huge tax bite. True, the estate tax went away in 2010, but it took the step up in basis with it. Although the estate tax takes a chunk out of an inheritance, the step up in basis gives some of it back to heirs in the form of a capital gains break. The step up refers to a forgiveness in the capi-tal appreciation of an asset while it was in the decedent’s possession. The heirs get the asset at the value when the per-son died, not when he or she bought it. In Steinbrenner’s case, he was part of a group that bought the Yankees for $10 million in 1973, a bargain price even then. Steinbrenner took the struggling team and built value through crafty deal-making, a skill he learned as he brought his family’s shipping company back from the dead and turned it into a $100-million-a-year business by 1972. He put together the first cable TV deal for a baseball team for about $500 mil-lion and then an even better deal when One of the reported have to worr y about the reasons why Karen estate tax—or do they? If they Davidson sold the decided to sell the team, they Detroit Pistons after would owe federal and state her husband died capital gains tax on, accord-was to soften the estate tax blow on ing to one estimate, about her children. $880 million, which would be a sizeable bill. The family would have the option to pay estate taxes instead of the cap-ital gains, said Kaufman, who added that families of some of his wealthy clients decided to take that option after figuring the different tax bites. “Electing the step up is more often the better deal in 2010, rather than taking the capi-William Wrigley Jr. bought the Cubs in 1921. Over 60 years later, the team would be sold by his grandson to cover estate costs. tal gains,” he said. “When you have clients with a wealth close to Stein-of these stories over the next couple of brenner’s, you really have to do a close decades. analysis.” In fact, broaden the view to the overall So it looks like the next generations of world of business and you see the enor-Steinbrenners will be able to perpetu-mous scope of the problem. It’s an issue ate the family business. The only serious that many owners of businesses and opponent to the Steinbrenner dynasty other large illiquid assets are not facing was the Tax Team—the IRS, which has up to, said Kaufman. vanquished others. Remember Wrigley? “People know they have to get it done,” The family had owned the Chicago Cubs Kaufman said, “but actually getting for 60 years, from 1921 until 1981, when around to it is a different story.” Bill Wrigley had to It’s not just families that suffer from sell to cover estate lack of planning; employees and partners taxes. do as well. “When you don’t have a buy/ Another instance sell in place, it can be a real problem,” w a s t h e N BA’s Kaufman said. Det roit Pi ston s, Although Steinbrenner is not a com-being sold by the pelling case to convince clients they ow n e r ’s w i d ow need to craft an estate plan, the Wrig-reportedly to soften ley family case would be. A majority of the estate tax blow people would associate Wrigley and the on her children. The owner of the NFL’s Cubs and can see how poor planning can Washington Redskins had an elaborate ruin a 60-year legacy. plan that included a charitable trust and And, after all, a majority of people a scheme for his son to win the team back could also understand that only George at auction, which failed because the son Steinbrenner can be as lucky as George did not have enough cash—an example Steinbrenner, leaving the rest of us mere of the important role of life insurance in mortals with the need to plan. estate planning. The sale of the NFL’s St. Louis Rams to settle estate taxes set off Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more speculation that the team might move than 25 years of experience as a and sparked a campaign to keep the team reporter and editor for newspapers, in town. St. Louis got to keep its Rams magazines and insurance periodicals. He was also vice president of com-when a minority owner took it over. munications for an insurance agents’ ESPN reported that the average age association. Steve can be reached at smorelli@ of NFL owners is 66, so expect more insurancenewsnet.com. Steinbrenner the adage that nothing is certain defies but death and taxes. he helped create the Yankees Entertain-ment & Sports (YES) network, which is now reportedly worth about $3 billion. Among other coups, he also signed a 10-year, $97-million agreement with Adidas. Then, of course, there were the top-dollar contracts to get the best base-ball players on his field, helping the team win seven World Series championships under Steinbrenner’s ownership. By the time Steinbrenner died on July 13, 2010, the team was worth an estimated $1.6 billion—the most valuable team in base-ball, according to Forbes. The Steinbrenner family does not May 2011 InsuranceNewsNet Magazine 19

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