Business Succession Lesson from the Oakland Raiders


The death of renegade owner Al Davis leaves the Raider Nation looking for future direction. A big question is how to pay estate taxes.

Family owned businesses can learn from the Raiders’ challenges, even though most are not large enough to incur estate tax liability. Under the current federal regime, no liability exists for estates less than $5 million. Despite these differences, the Davis estate underscores the importance of planning as a way of preserving business continuity. A well-considered business succession plan is essential to keeping the team in the family.

Raider Nation

Business Insider discusses NFL ownership rules and then provides the following explanation of the impact of estate taxes on the Raiders:

Davis unfortunately died a year too late. In 2010 there was no federal estate tax. There is in 2011. The base rate is 35% on estates over $5 million. While we don’t know the exact size of Davis’ estate, if we assume he took advantage of the NFL rule described above, and we estimate the value of the Raiders franchise at $750 million, then a rough estate tax calculation would be around $50 million.

That’s still a significant amount of money and it’s not clear if Davis’ family will be able to pay the estate tax bill without selling part or all of their ownership in the Raiders. When St. Louis Rams owner Georgia Frontiere died a few years ago, her children opted to sell their controlling interest to a minority partner, in large part to pay their mother’s estate taxes. Selling an NFL franchise isn’t a simple process, however. By NFL rules, the league can’t prevent family members from inheriting a team, but the other clubs must approve a sale to any outside party. That requires a detailed review by the NFL’s finance committee and final approval from at least three-fourths of the other owners.

The entire article is available from Business

Creative Commons License photo credit: the_junes

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