New pressure for owners of successful sports teams arises from their soaring values, affecting taxes and succession planning.

• Ownership transitions in professional sports are becoming a growing concern for leagues and team owners.
• The National Football League has seen a rise in the importance of succession and taxes, with the average age of team owners increasing to over 72 and team values continuing to surge.
• The official 2024 NFL team valuations list, which ranks all 32 professional franchises, will be released on Thursday by CNBC.

Team owners profiting from rising team values are simultaneously facing increased pressure from two fundamental aspects of American wealth: mortality and taxation.

As team values continue to soar and the average age of team owners increases, there is a growing emphasis on ensuring a seamless transfer of ownership to the next generation of buyers. Despite the complexity of current tax and succession strategies, unforeseen family conflicts or tax changes can still disrupt even the most meticulously crafted plans.

"Stephen Amdur, co-leader of mergers and acquisitions and private equity practices at Pillsbury Winthrop Shaw Pittman, stated that the individuals who purchased sports teams in the past have discovered that a significant portion, if not the majority, of their long-term inheritance is now tied to the value of the team. These individuals are now considering who will inherit the team for the next generation and what they will do with it."

The NFL has seen a rise in the importance of succession and taxes, with the average age of team owners increasing to over 72 and team values continuing to surge. On Thursday, CNBC will release its Official 2024 NFL Team Valuations list, which ranks all 32 professional franchises.

NFL owners must decide whether to sell their team while alive, resulting in capital gains tax bills, or pass it on to their families, potentially causing estate taxes or family disputes over control.

Despite creating a comprehensive succession and tax plan for the Denver Broncos a decade prior to his death in 2019, a contentious dispute among family members resulted in the team being sold in 2022 to heir Rob Walton for $4.65 billion.

The Tennessee Titans were founded by Bud Adams, who passed away in October 2013. He divided ownership of the team among three branches of his family in an attempt to maintain peace. However, this move resulted in a highly public battle over control, ultimately leading to a family deal. Currently, Amy Adams Strunk, Bud's daughter, serves as the controlling owner of the team.

Tom Benson, the longtime owner of the New Orleans Saints and New Orleans Pelicans, sparked years of legal disputes by removing his daughter and grandchildren from his will and leaving the NFL team and NBA franchise to his wife Gayle upon his death in 2018. Despite his passing, Gayle continues to hold control over the Saints.

The Miami Dolphins' owner, Joe Robbie, left the team to his wife and nine children at his death in 1990. However, a family feud and estate taxes of over $45 million forced the family to sell a majority of the team in 1994.

If an individual's estate exceeds $13.6 million or a couple's estate exceeds $27.2 million, they are subject to a 40% tax under current U.S. tax law. With the value of NFL and NBA teams reaching billions, all team owners could potentially face hundreds of millions in taxes without proper planning.

The expiration of current estate tax rates in 2025 may result in more punitive taxes, so owners must plan accordingly.

Today's team owners have a wider range of tools to minimize the tax impact of succession, according to trust and estate attorneys. One of the most popular is the family limited partnership, which makes family members minority stakeholders and leaves the primary owner with control. By dividing up ownership, the partnership can lower the value of assets and therefore the taxable estate of the general partner.

Owners can split ownership among family members through individual trusts, as Chicago Bears owner George "Papa Bear" Halas Sr. did with his 13 grandchildren. They can also transfer an interest in the team into an irrevocable trust through a partnership or an LLC.

Amdur stated that owners are increasingly focusing on long-term estate planning to minimize taxes.

If the team remains within the family, the owners may hope to pass on their love and financial responsibility for the team to their children. However, the next generations may have different interests or financial objectives, which could result in the need to transfer some ownership of the team.

And there's now a fresh pool of prospective buyers.

The NFL approved private equity firms to purchase minority stakes in teams, allowing owners and their families to withdraw cash and reinvest or diversify their investments while maintaining control.

NFL Commissioner Roger Goodell stated that he believes it is suitable to provide the teams with liquidity so that they can reinvest in the game and their teams.