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The Bills In Trust? Sucession & Tax Rules Could Decide Team's Future



So much of what happens to the Buffalo Bills after the death of owner Ralph Wilson, will be determined by what he has put in his will, and by the terms of the trust that is believed to be owning and operating the team now.

And while a lot of that may never be made public-- experts say disclosure would hurt the team's value--   there are some basic ways that this could play out,  based on the typical way of doing things

WBEN took a look Thursday morning at some of the likely scenarios, and what the law allows.  


 
Trusts & Estate Tax Basics, and What they Could Mean for the Buffalo Bills

Beneficiaries:  There would be no estate tax if Ralph Wilson leaves team directly to wife or in trust to wife.  At that time, tax is deferred until her death.  His daughters can also be named contingent beneficiaries.  As to the taxes, the federal estate tax is around 40%.

The Trust: If the Bills are placed in a trust as it is assumed they have been, the trust will have 2 groups: the trustee and the beneficiaries.  The trustee makes all the decisions, will have title to the property and will run the trust according to the terms set up for the trust.
The trust is run for the benefit of the beneficiaries.  The trustee would essentially be in charge of the Bills.

Estate taxes can be structured so they're paid off over a number of years as opposed to all of it being paid right away.  you have 9 months from the date of the person's death to figure out things before the first tax payment is due.

Selling The Team if in a trust: The trustee generally has complete power and has the responsibility to obtain maximum value for the team on behalf of the beneficiary or beneficiaries.  The trustee doesn't answer to anyone other than having a fiduciary responsibility to operate the trust in the best interests of the beneficiaries.  The trustee has the power to make any decisions related to the operation of the team including hirings and firings. Ralph could set up the trust  in such a way that the team can't be sold for a certain amount of time.  However the laws about that are different from state to state so it could matter whether or not the trust is set up in New York or Michigan or wherever.

Other Options:  Wilson didn't necessarily  have to  to set up a trust if he didn't want to.  He could have left instructions for the team to be sold immediately upon his death.  Most people don't do that because it doesn't necessarily maximize the value of the property for sale and return.

The Dream Scenario (for fans):  He has already transferred most of the estate to help minimize the estate taxes or he has a lot of money set aside to help pay those estate taxes off.  Those taxes could run between $300-400 million depending on the value of the team and those taxes are only for the team and don't take into account his total net worth
.
Other Possibilities: It is within his right to have already reached agreement giving someone the right of first refusal to buy the team upon his death

Key Questions that may not become public knowledge: What does his will say?     What is his estate plan?   Did he transfer anything already to help reduce the estate taxes?

- Source: Roy Cunningham, Mathias Wexler Friedman LLC. Research by WGR's Howard Simon

 
 

Exclusive WBEN Audio
Buffalo's Early News In Depth:

Hear Attorney Roy Cunningham with WBEN's John Zach & Susan Rose 


 "There's lots of speculation as to what or may not be his estate. The trust could say anything ,"
-- Attorney Roy Cunningham, a partner with Lippes Mathias Wexler Friedman LLC in Buffalo
.
 

"There's lots of things that could happen. Most of the times with an estate this big, particularly with a celebrity, as opposed to having just a will they will have a living trust or a series of trusts that will determine where the property goes," says Cunningham, who concentrates on trust and estate matters.
 
What's the team worth? And how does that influence who could buy the team?

Experts say it is a seller's market for NFL teams right now, and with three teams being sold in the last five years, demand is high.


And owning a team is the kind of investment that most anyone would want in on, if they could afford it.

Kurt Badenhausen
"It's really hard to lose money with an NFL franchise, because of the annual TV revenues, which are going to skyrocket. These guys make money year after year after year,"
     --Kurt Badenhausen, Forbes Magazine


"It's going to take a lot of money.. anytime a team comes up for sale, we have typically a lot of buyers," says Forbe's Kurt Badenhausen, who covers the business of sports and compiles the magazine's annual rankings on professional sports team's worth

Ralph Wilson paid $25,00 in 1969 for the FL franchise. by Forbe;'s calculation, the team is now worth $870 million, " an annualized change of 23 percent, which is a remarkable growth," says Badenhausen who is also involved in the magazine's annual list of US billionaires.
 

Who Could Afford The Team?

"I think if the team is going to stay in Western New York, you have to look at (former Sabres owner B. Tom) Golisano (pictured far R), he has certainly expressed interest in the past.

And you have to look at (Sabres owner) Terry Pegula, ( above R) the owner of the Sabres He certainly has the funds to get it done. Forbes values his net worth at more than $3 billion ." Badenhausen says.

 

Ron StifterThe stadium:

Badenhausen says Ralph Wilson Stadium is a double edged sword of sorts.

  It's old enough to need renovations, but with a lifespan that could match up with a new owner's need to have a new one .


"An old stadium in a small market is not going to generate the kind of money you see in big markets, particularly when almost everybody in the NFL has a new stadium in the past 20 years."

But it also includes a lease with Erie County that binds any owner to the region, unless they are willing to pay $400 million to break it.  

"The 400 million is a non- starter. I don't think anybody is going to put up that kind of money, but you have that one year option clause where you can get out in 2020 for just $28 million."  he says. 

 
From Crain's Detroit Business
Bill Shea writes:

  The poster child for professional sports team estate planning gone awry despite the owner's intentions was Joe Robbie, who bought pro football's Miami Dolphins for $7.5 million in 1966.  Robbie, a lawyer, died in 1990 at age 73, thinking he had made adequate insurance and trust arrangements. 

Some other notable examples of succession planning or an estate tax situation include   Jack Kent Cooke, who became full owner of the Washington Redskins in 1985, gave the NFL team and its stadium to his foundation upon his 1997 death, and mandated they be sold after his death. A son, John Kent Cooke, tried to buy the team and stadium, but Maryland businessman Daniel Snyder eventually bought them for $800 million.     READ MORE

 


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