This is the third installment of a series covering inheritance and estate planning in the National Football League, where owners, with an average age of 72, face decisions familiar to any family with assets to pass to the next generation—compounded by restrictions unique to a league where the average franchise valuation is $4.14 billion.
In the early 1980s, as Chicago Bears founder George Halas was nearing the end of his life, he dramatically reshaped the ownership of one the National Football League’s oldest and most storied franchises.
Through a series of interlocking family and individual trusts, Halas divided his 49.35% of the team into equal 3.8% stakes for his 13 grandchildren. The restructure came directly from the estate planning playbook: It limited the tax that would be owed when he died, and helped assure that the Bears would remain in his family long after his passing.
It also eased the future tax burden for Virginia McCaskey, his only living child, who already held nearly 20% of the franchise. While the new structure didn’t provide McCaskey directly with any more equity, Halas critically gave his daughter voting power over the shares now held by his 13 grandkids. The arrangement wasn’t explicitly permitted under NFL rules, but owners voted to allow it, one of many concessions the league has historically made on this topic to accommodate its longest-tenured owners.
The Halas arrangement has worked, albeit delicately, for 40 years. But the Bears could soon run into the very problem Halas sought to protect his family against. Current NFL bylaws state that a single lineal family (not necessarily a single person) must control 30% of each franchise, which the 99-year-old McCaskey does via that voting trust. When she dies, the voting trust expires, and the Bears ownership will be thinly spread over more than a dozen Halas heirs, without a single person or descendant anywhere close to that 30% threshold.
Estate planning has been a quiet priority of the league’s owners for decades, according to a number of people in and around the NFL, but the issue has taken on increased importance of late, following a series of very public fights. The issue is compounded by the league’s stated desire to keep franchises as family businesses, an aging cohort of owners, and soaring multibillion-dollar valuations, which makes teams both more desirable and harder to pass on to heirs.
“The bottom line is, estate planning is a big deal, because how you transition an asset of this size, within a family, is an extremely sensitive subject,” Atlanta Falcons owner Arthur Blank said in an interview. “You could have a number of family members. Some have an interest in the team, some don’t. Some want money to use for philanthropic purposes or for other investments. As a principal owner, it becomes a difficult process that you definitely want to manage when you are vertical.”
The Bears, whose owners declined to comment for this story, have a plan to keep the team in the family when Virginia McCaskey dies, according to multiple people familiar with the matter. Specifics of that plan weren’t provided, but would require re-consolidating control of at least 30% of the team, which is now worth $5 billion, into a single wing of the McCaskey family. It could also involve the sale of some equity.
Bears ownership appears to have cleared the first two hurdles of NFL succession planning—minimize tax impact and create a framework for the heirs. The final, and often most complex, step is successfully executing that plan when the time comes.
“Things can get really complicated with passing them to the next generation,” Sean Clemens, a principal at Park Lane investment bank, said in a phone interview. “[Teams] also need to get their governance lined up so they aren’t too fragmented from a league standpoint, and sometimes that creates friction, creates lawsuits, and creates a need to exit.”
Annual NFL Filings
The NFL is aware of the McCaskey estate plan, and that of each of the other 30 family-owned franchises (the community-owned Green Bay Packers are an exception). Every summer, those teams submit updated franchise succession plans with the league’s central office. The documents, according to multiple people familiar with the process, lay out the current owner’s intentions for the team once he or she is no longer in control. Will there be an interim owner? Will the team be sold? Which heir will take over? Is that child aware and willing to assume responsibility?
The league loosely kept tabs on these plans for decades, but the process was formalized in 2015, the people said, amid a series of high-profile NFL family feuds. The NFL declined to comment.
“One of the purposes of doing the succession planning is to get these issues identified early to permit discussions,” Frank Hawkins, a former NFL finance executive, said in a phone interview.
The average NFL franchise is now worth $4.14 billion, but the league still believes in each franchise as a family business. The NFL doesn’t allow corporate ownership and is the only major U.S. league to still prohibit private equity investment. It’s not uncommon for NBA teams (like the Chicago Bulls, for example) to have 20 or more minority partners, but it’s virtually unheard of in the NFL. Also, the 30% rule established by the NFL also doesn’t exist in any other major league.
To help owners navigate it all, the league is constantly discussing and adjusting its ownership rules. That includes making special considerations for its longest-tenured families, such as the Rooneys in Pittsburgh, the Maras in New York and the McCaskeys in Chicago. The three families spent a combined $3,100 to buy their teams in the 1920s and ’30s; today, the Steelers, Giants and Bears are worth a combined $15 billion.
“The owners own the league, and it’s for the owners to decide what the rules are,” Marc Ganis, co-founder of Sportscorp and an advisor to the NFL, said. “If they choose to adjust the rules to make it easier for their heirs to keep the teams as generations change, that is entirely and completely their prerogative. And they do that.”
From 51% to 1%
For decades, the NFL required one person to own at least 51% of the franchise. The threshold dropped to 30% after H.R. “Bum” Bright bought the Dallas Cowboys for $85 million in 1984. Bright wanted control of the team but only wanted to contribute 30% of the equity and owners signed off the transaction. It kicked off a series of ownership rule tweaks, often done to satisfy the league’s long-standing families.
The NFL has continuously dropped the ownership threshold required by the lead owner, as long as the family collectively controlled 30%. New owners must still put up 30% of the purchase price and can take advantage of the relaxed thresholds after 10 years.
In 2004, the lead owner was allowed to dilute down to a 20% stake, and five years later it was 10%. It was lowered to 5% in 2015 and finally to 1% this spring. The effect is to limit the potential estate tax bills of aging primary owners. The average age for 31 primary NFL owners (excluding Green Bay) is 72 years old, and by October, there will be seven owners who are at least 80 after Blank and Cowboys’ owner Jerry Jones hit the mark.
The rules require a delicate balancing act. On one hand, league owners want to make it easier to pass franchises along to their kids and grandkids without shouldering the burden of hefty estate taxes that have forced many prior sales. On the other hand, the NFL wants family-controlled businesses that are protected from financial uncertainty and family in-fighting, which means it wants concentration of equity and voting shares.
The longer a family holds an NFL team—and there are three already in their 10th decade—the harder it is to satisfy both those desires. The Bears have minimized the tax issue but will likely soon reach a point where equity is spread widely across a few outside investors, George Halas’ grandchildren, and possibly the generation below them, the eldest of which are already in their 50s. Other NFL owners who have been less focused on passing down teams to heirs are likely facing significant tax burdens when they die.
“The [bylaws] do operate at cross-purposes to some extent,” Hawkins said.
Those purposes can easily collide. Hawkins described a scenario where the child of an owner might bristle if his or her sibling is the one chosen to run the family’s most public asset. “The more you require one guy with a very small interest to control the family’s biggest asset, and force everyone else to be blocked out, the more tension you are going to have.”
A Six-Figure Fine
One of the driving forces behind the NFL’s soaring valuations is scarcity—there are only 32 franchises, and they rarely sell. Since the start of 2013, for example, just three teams have traded hands, each for a new league record. The Bills sold in 2014 for $1.4 billion, the Panthers in 2018 for $2.28 billion, and the Broncos this year for $4.65 billion.
Both the Bills and Broncos sales came following the death of an owner. In fact, half of the most recent dozen NFL team sales can be traced to the death of the prior controlling owner. In 2010, the then St. Louis Rams were sold to Stan Kroenke so Georgia Frontiere’s children could satisfy their estate tax bill. Ralph Wilson (Bills), Leon Hess (Jets) and Jack Kent Cooke (Washington) all called for their teams to be sold after their passing, and Saints owner Gayle Benson said last year she will do the same. Atlanta and Denver were sold after their respective owners died, with the heirs in both cases fighting over whether to keep the team in the family. The Seattle Seahawks are currently controlled by the trust of late owner Paul Allen, who instructed that the team be sold with the proceeds going towards philanthropy.
As happy as the NFL is to add Walmart heir Rob Walton to its ownership ranks in Denver, the league prefers teams stay in the family when an owner dies. And while it has been willing to loosen rules, it has recently also proven willing to enforce them. In 2015, when the late Bud Adams’ two daughters were fighting over the Titans’ future, the NFL levied a six-figure fine for the team’s failure to comply with league rules. The Titans later met the requirements, and unsuccessfully appealed the fine.
The longest-tenured family owners often have the least wealth from non-team assets. There’s a big difference between the financial status of Walton, one of the richest people in the world when he bought the Broncos, and the Halas/McCaskey family, who bought the Bears in 1920 for $100. For a handful of NFL families, the football team is overwhelmingly the central asset, which complicates things financially both from a tax perspective and a familial one.
Each successive generation also makes estate planning increasingly difficult, according to attorney Carolyn Caufield, partner and chair of Herrick’s private clients practice group. More heirs means more people who might have claim to the team—and more people who might feel snubbed by their lack of involvement, or want to sell that stake to pursue other interests.
The Bears are a prime example. George Halas had two children, one of whom predeceased him, and 13 grandchildren. Virginia McCaskey already has more than 20 grandchildren and more than two dozen great grandkids.
“It’s not always financial, because presumably they all have a financial stake in the team, but it’s the leadership roles that really end up dividing families, and these are divisions that go down the line,” Caufield said in an interview. “And once you get to the third generation, it’s impossible.”
‘The Cain and Abel Scenario‘
The strength of the NFL’s business can sometimes smooth over these conflicts, which Caufield called “the Cain and Abel scenario.” Every NFL team is profitable, most to the tune of $100 million-plus annually, which gives them the ability to return dividends to their shareholders. Heirs who aren’t actively involved in the team and want money for other endeavors can lean on those profits before pushing for any more drastic action.
That could work to the Bears benefit when it’s time to reconsolidate the shares currently held together by Virginia McCaskey’s voting trust. The team has won one playoff game in the past 15 years, prompting many fans to push for a change in ownership. But the team has made money, including an estimated $140 million operating profit in 2021.
The McCaskey family ownership hasn’t been without drama in the 40 years since George Halas created those interlocking trusts. In the late 1980s, George Halas Jr.’s two children chose to sell their late father’s 19.7% stake in the team, launching a legal battle between the McCaskey and Halas families. That equity eventually ended up in the hands of Andrew McKenna and Patrick Ryan, who remain the team’s largest non-family shareholders. (Virginia McCaskey maintained control of the 3.8% stakes those two grandkids were given separately as part of the original reorganization).
In 1990 there was also a noteworthy settlement with the IRS regarding the tax ramifications of the interlocking trusts. The government claimed that the team was dramatically undervalued in the original Halas restructure, which put the team’s value at roughly $16 million. The IRS estimated it should have been about $80 million, according to the Chicago Tribune.
The government was seeking $50 million in back taxes and penalties, but the team emerged instead with a $1.4 million refund, the Tribune reported, meaning it paid less tax than if the IRS never brought the claim. (The 1981 Halas reorganization also occurred just a few years before Congress enacted a generation-skipping transfer tax, which would have further burdened the family in his move to shift Bears ownership directly to his grandchildren).
Virginia McCaskey turns 100 in January, and it’s unclear how much she still owns of her original 19.7% stake. She can go as low as 1% under NFL rules, and it’s most likely that her stake has been whittled down to further reduce the tax hit when she passes.
The ultimate goal, of course, is to avoid a controlling sale. McCaskey, who rarely gives interviews, told The Athletic in 2016 that the franchise would stay in her family until the “second coming.”
“After dad died, at age 60 I started a whole new life,” she said. “It was pretty scary. A lot of people were saying we should sell. It never occurred to me to do that. I can’t think of anything else I’d rather be doing.”
More from Sportico’s NFL Succession series:
Broncos’ Fumbled Handoff Reveals Perils of NFL Estate Planning
Why Leon Hess’ Jets Succession Plan Remains a Model for the NFL