Alex Spanos, owner of the Los Angeles Chargers, formerly the longtime San Diego Chargers, recently passed away. The Team will not need to be sold to pay the massive Estate Taxes that are normally triggered by a transfer of a very valuable Family Business to the next Generation.
Start Early
When Mr. Spanos purchased the NFL Team he started working on the Estate Planning transfer of the Team in such a legal and proper way so as to limit Estate Tax exposure. He did what most Family Business Owners do with good Estate Planning. He kept the Controlling Interest in the ownership of the NFL Football Team, while transferring more and more of the partial ownership interest over time to his children. He transferred by Trust the limited partial ownership interest to his children. More ownership interest was transferred over time so that a majority of the ownership of the business could be with his children, yet Mr. Spanos kept the controlling interest in the business. We discussed how this is done previously in my previous blog, Succession: Getty and the Biltmore Estate.
Since this transfer was done over time Mr. Spanos’ adult children are able to continue to own and control the Team without having to sell any interest in the Team to pay Estate Taxes.
This is How it is Done
There was a recent article criticizing the transfer of Family Businesses over time through the use of Business Entities, Discounts, and Trusts where you are moving ownership interests to the next generation of the Family over decades. However, this is perfectly legal, standard practice and has been accepted by the IRS and other Government entities for decades. There is nothing unusual about it. In fact, this is how you are able to transfer Family Businesses with each generation. This is how the Walton Family still owns Walmart. This is how the Johnson & Johnson business is still owned by the Johnson Family. This is how Johnson Wax in Racine, Wisconsin is still owned by another Johnson Family. This is probably how Jerry Jones’ adult children will come to own the Dallas Cowboys after Mr. and Mrs. Jerry Jones pass on. The planning has to be done in advance and over time, but is perfectly legal, perfectly proper, has been accepted by the IRS, other Government entities and the Courts, including the Tax Courts.
Summary
With good Estate Planning done in advance, you can transfer the Family Business to the next Generation and keep it going without having to sell it off, or parts of it off, to pay Estate Taxes.
At the Law Firm of Steven Andrew Jackson, Attorney and Counsellor at Law, we have helped hundreds of families protect themselves and their loved ones, avoid Estate Taxes and Probate Costs, and keep their Estate Plans current with the law through The Customized Protective Estate Planning Solution™.