It is not often that sports and estate planning intersect, but two of my favorite things did so recently when the New York Times (and many other sources) reported that the Grousbeck family, the controlling owner of Boston Basketball Partners LLC which owns a majority interest in the Celtics, announced that it has decided to sell the basketball team. The Celtics’ statement said the sale was prompted “after considerable thought and internal discussion” by “estate and family planning considerations.” Although the statement was short on details, it is suspected that 90-year-old H. Irving Grousbeck is the one driving the sale. His 63-year-old son Wyc Grousbeck, one of Irving’s four children, owns a relatively small stake in the team himself, but manages his family’s controlling interest.

So why would you want to sell the Boston Celtics, a team that less than two weeks before the sale was announced won their 18th NBA Championship and have most of their team under contract for the foreseeable future? For estate planning reasons, of course! Here’s some insight into what Irving and his estate planning attorneys might be thinking.

Taxes Might Be Driving the Team Bus
Irving and his ownership group bought the team for $360 million in 2002. Today, after winning its latest championship, the team is worth an estimated $4.7 billion. That’s a nice return on investment, but nothing comes without a price.

If Irving dies owning an interest in the Celtics, that interest will be an asset of his estate, and the value of that interest will be subject to estate tax at his death. Although Irving hails from Northampton, Massachusetts (which might explain his interest in owning the hometown team), he currently lives in Portola Valley, California. Although the weather may have played a part in the decision to move west, there is also an estate tax advantage. California (unlike Massachusetts) is one of the majority of states that do not impose a separate state estate tax on its residents.

However, when you own an interest in an asset that’s worth billions of dollars (not to mention the value of your other assets), you need to worry about the federal estate tax, which is a tax imposed on assets owned at death which exceed $13.6 million (in 2024). Assets over this threshold are taxed at a whopping 40%.

So how does selling the team help Irving potentially save estate tax for his family? If Irving sells his interest, he will still have the same amount of assets (less some capital gain tax of course), but rather than an interest in a basketball team, he will have cash. Cash is much easier to plan with. Here are some ways Irving might use that cash to save some estate tax:

• Irving can give a bit of that cash to anyone he likes. The gift tax annual exclusion allows Irving to give $18,000/year to any person without having to pay a gift tax or file a gift tax return, and without reducing the $13.6 million federal estate and gift tax exemption Irving has to use against the value of his estate at his death. But even after giving annual exclusion gifts to Wyc and his siblings, and to Jayson Tatum, Jaylen Brown, Jrue Holiday, Derrick White, and the rest of the team, Irving will still have a lot left.
• Irving can pay tuition for his grandchildren without limitation – gifts made to an educational institution for tuition (or to a medical institution for medical care) can be made in an unlimited amount without any gift tax implications.
• Next on the tax savings idea list may be giving a bunch of money to charity, which will reduce Irving’s taxable estate without reducing his exemption. Doing so will also provide a nice income tax benefit to Irving currently.
• Irving might also want to consider making larger, “taxable” gifts before the end of 2025. The current federal estate tax law is scheduled to “sunset” or end on December 31, 2025. If Congress does not act before that date, the prior law will come back into effect. This means that the current $13.6 million estate and gift tax exemption will drop to approximately $7 million. Because making taxable gifts during your lifetime reduces your estate/gift tax exemption, Irving may be thinking about making some larger taxable gifts to take advantage of his $13.6 million exemption before that exemption drops down to $7 million and he loses the opportunity to give away that extra $6.6 million estate and gift tax free.
• Irving may also wish to consider “skipping” a generation with his gift-giving, as giving gifts directly to grandchildren will avoid estate tax on those assets when his children pass away.

Again, easier to do any of these things with cash than with an interest in a basketball team. If Irving is serious about gifting, he can reduce the value of his taxable estate significantly, benefiting his family and charity in the short term, and benefitting his family in the long term by reducing the estate tax they will have to pay at his death. Keep in mind that for every dollar Irving gives away he is likely saving his family $0.40 in estate tax when he dies.

Another reason to cash out now is the estate tax that is likely to be due at Irving’s death. Whether Irving dies before or after the current estate tax law sunsets, and even if Irving makes gifts to reduce the value of his estate, the federal estate tax payable on Irving’s estate will be significant. And the IRS does not accept Celtics tickets, even if they are courtside playoff tickets, in payment of the estate tax bill. They deal in cash only. So, better to liquidate a large asset now and free up some cash for the estate tax bill that’s coming due. When you are 90 years old, that bill could come due and payable sooner rather than later.

Succession Planning Is Difficult On and Off the Court
When you have multiple children and one special asset, planning can be challenging. That asset could be a family business, a beloved vacation home, or a racehorse. All of these things are valuable, valued by some or all family members, and illiquid – a difficult combination.

Wyc has done a great job being the face of the majority ownership group for years. However, Irving probably wants to benefit each of his children equally in his estate plan, even if only one of them has given him the joy of an NBA championship this year.

If Irving dies owning the team, Wyc may want to keep the team, but his siblings may want to sell, creating potential family disharmony. Sometimes, it’s possible to give one child who may be involved in the family business, for example, that particular asset and give other assets to the other children while still equalizing the value of assets everyone receives and maintaining family harmony. And it may even be the case that Wyc’s siblings care nothing about basketball and would be happy for him to receive Irving’s ownership interest in the Celtics when Irving passes if they get other assets of equal value. The problem for Irving is that when you have a basketball team that’s worth a whole lot (and likely to keep appreciating in value, at least in the short term) it’s hard to equalize things for your other three children unless you have a whole lot of other assets. Selling Irving’s interest in the team now will allow for easier equalization of his assets among his children at his death, which will simplify Irving’s estate. This is an issue faced not just by Irving, but by the owners of all professional sports franchises.

Although we estate planning attorneys may make it look easy, estate planning is complicated – especially for those individuals who hold our beloved sports teams’ destinies in their hands. Assuming you don’t own a professional sports franchise, your personal estate planning situation may not be as complex, but good estate planning advice is important for everyone who wants to make sure their assets pass efficiently and harmoniously to their intended recipients.

Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham (and a Boston Celtics fan). She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and a past President of the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
August 2024
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