Dan Gilbert situation raises sports team estate planning question – Crains Cleveland Business

Dan Gilbert situation raises sports team estate planning question - Crain\s Cleveland Business
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In August 2016, Terry Foster, a former Detroit News and Free Press sportswriter and radio personality, had a stroke. In 2017, he returned to his radio gig at 97.1 The Ticket, but retired a short time later.

In a blog titled "Dan Gilbert illness hits close to home," Foster, 60, writes about his experience dealing with the stroke:

I wondered what those symptoms were and how he felt at the time. I experienced similar symptoms nearly three years ago when my blood pressure hit the ceiling and I suffered what was considered a mild stroke. Although I lost my voice for a while and could not step or type I feel close to normal now.

I don’t feel like the old guy that used to dance around and act a fool. That guy died and was replaced by a calmer, less aggressive and not quite as sharp version of the old guy.

Gilbert suffered a stroke Sunday after arriving Sunday at the Beaumont Hospital in Royal Oak. Its severity and possible impact on the business executive are unclear. 

Bloomberg Dan Gilbert, founder and chairman of Quicken Loans Inc. and owner of the National Basketball Associations Cleveland Cavaliers, arrives to speak during the Alibaba Group Holding Ltd. inaugural Gateway 17 conference in Detroit on June 20, 2017. Photographer: Jeff Kowalsky/Bloomberg News that Detroit real estate billionaire and Cleveland Cavaliers owner Dan Gilbert suffered a stroke over the weekend has raised interest in his succession plans for his many business interests.

Gilbert, 57, owns the Cavs and several minor-league franchises, and he may fully recover and go on to run them for decades to come. But he also may not, and every owner eventually sells or wills the team to family or new owners.

Video: As Dan Gilbert recovers from a stroke, his impact on Cleveland and Detroit cannot be understated

As sports teams have grown into billion-dollar businesses, the stakes have radically increased over their ownership fates. Sometimes, it can be quite messy when an owner dies. Owners sometimes leave little clarity on a teams fate once they die. And owners sometimes make elaborate plans that are scotched by federal tax implications or the desires of family.

Video: As Dan Gilbert recovers from stroke his impact on Cleveland cannot be understated

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In Gilberts case, he is head of an investment group that paid $375 million for the LeBron James-led Cavaliers in 2005, and his ownership highlight so far has been an NBA championship in 2016 that likely endears him to the people of that city. After all, theyd been starved of a pro sports championship since 1964. Gilbert just poached beloved Michigan basketball coach John Beilein to coach the rebuilding Cavaliers, too.

Gilberts camp hasnt said what his succession plan for the team is, although each of the major leagues requires owners to inform them of such plans.

Cavaliers owner Gilbert alert, resting comfortably after stroke

Putting a team in a trust is a common practice that can shield heirs from federal estate tax bills that can run into the hundreds of millions of dollars for pro sports franchises. Spouses are exempt from estate taxes, but children are not.

Entrusting an asset freezes the value under federal gift tax law at the time it was put into trust, which is one way to reduce the eventual tax bill. Since sports team values have been skyrocketing because of enormous local and national TV rights deals and other revenue streams, the tax value of a team can be enormous, even for wealthy people.

Some sports team owners have purchased insurance policies intended to pay off estate taxes so that heirs wouldnt struggle with tax bills — which sometimes can force a team sale. For example, the estate tax bills from the Internal Revenue Service fueled the sale of the National Football Leagues Miami Dolphins in 1993 and St. Louis Rams in 2008. The Lerner family had to sell 40 percent of its stake in credit card giant MBNA to pay its estate tax bill after Cleveland Browns owner Al Lerner died in 2002.

Quicken Loans CEO shares update on Detroit businessman Dan Gilberts health after stroke

Detroit businessman and Buffalo Bills owner Ralph Wilson, who died March 25, 2014, at age 95 at his Grosse Pointe Shores home, arranged for the team to be sold by his estate (for $1.4 billion to Buffalo Sabres owners Terry and Kim Pegula), to benefit the Grosse Pointe Farms-based Ralph C. Wilson Jr. Foundation.

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