Keeping Redskins no sure thing Fortune is cushion for Cookes on taxes

April 08, 1997|By Jon Morgan | Jon Morgan,SUN STAFF

Headlines in yesterday's Sports section incorrectly characterized the status of the Cooke family's ownership of the Washington Redskins as a result of Jack Kent Cooke's death. There are no plans to sell the team.

The Sun regrets the errors.

Jack Kent Cooke's legacy of achievement ranges from blockbuster real estate deals to Super Bowls, but for his heirs, one of his most momentous feats may simply be keeping the Washington Redskins in the family after his death.

Sports franchises have grown so valuable so quickly that heirs may not have enough money to pay the estate taxes. In several cases -- most notably the family of Joe Robbie and the Miami Dolphins -- the team has had to be sold to pay taxes that can total half the value of the estate.

FOR THE RECORD - CORRECTION

"The growth in value of the franchises makes it difficult to keep up with, even with insurance or other things you want to do, because it keeps growing," said Dan Rooney, president of the Pittsburgh Steelers.

The Steelers were founded by his father, Art Rooney, and were kept in the family after the elder Rooney died in 1988. Another generation of Rooneys is involved in team management and hopes to take over when the time comes, said Dan Rooney.

"It's not an easy thing. Hopefully, you can work it out," he said.

The Redskins say they expect the team to remain in the hands of the family, with John Kent Cooke, 55, the late owner's son, as chief executive. Before his death, the elder Cooke frequently expressed a desire for his family to keep the team for several generations to come.

It helps greatly that Cooke left a far-flung financial empire whose value has been estimated at upward of $1 billion. Other elements of the portfolio can be sold to pay the taxes and keep the team in business. A chunk of the team also can be sold to investors, with control remaining within the family.

"There's always the problem of estate taxes, but there are ways, with careful planning, to address them. You can't just run along with the club and do nothing and then die," said Thomas Guilfoil, general counsel for the Arizona Cardinals, now owned by the second generation of the Bidwill family.

In an estate the size of Cooke's, the government generally demands about 55 percent of the market value as the estate tax. There are ways to shield some assets, and to defer payments, but the long-term options are somewhat limited.

"The truth is, in very big and very small estates, there's not a lot you can do," said Jeffrey Pennell, a law professor and estate tax expert at Emory University in Atlanta.

Cooke never disclosed the precise value of his holdings, but experts say the team itself -- one of the NFL's premier franchises, and one about to move into a new, highly profitable stadium -- could probably command more than $250 million. The stadium, depending on how it is financed, may be worth another $200 million.

When one asset, such as the team, represents 35 percent of the total value of an estate, the taxes can sometimes be deferred. Payments can stretch out for 10 years and don't have to begin for five years, although interest must be paid, said Helen Kemp, a partner with Mays & Valentine in Richmond, Va., and the past chair of the Virginia Bar Association's Wills, Trusts and Estate section.

Delaying payments allows heirs to pay the taxes from operating profits or to arrange an orderly sale.

Team owners also can leave the franchise to a spouse, who will not have to pay estate taxes. But his or her heirs will have to do so upon the spouse's death.

Both the Dolphins and Tampa Bay Buccaneers were put into family trusts in the past decade, but the transfers failed to prevent the sale of the teams to outsiders.

The founder of the Buccaneers was Hugh Culverhouse, a lawyer specializing in estate planning. When he died in 1994, the bulk of the team was transferred into the hands of a trust whose chief beneficiary was his widow. Upon her death, the trust was supposed to sell the team and distribute the proceeds to charities, avoiding estate taxes on all but a few tens of millions of dollars distributed to family members.

Bickering among the trustees and relatives, however, led to a court fight and a dissolution of the trust and sale of the team in 1995 to Malcolm Glazer. A similar fate befell the Robbie family after Dolphins owner Joe Robbie died. The team was sold to H. Wayne Huizenga in 1990.

Among long-time NFL owners are many, such as the Ravens' Art Modell, who paid a relative pittance for a team and have lived to see it appreciate astronomically. Unfortunately, there are not always other assets sufficiently valuable to pay taxes on the team.

Modell has taken steps to set up a trust that he hopes will ensure his family retains the team without having to take on investors, an option some survivors have had to consider in other cases.

"It's a concern to every family-owned franchise," Modell said.

NOTE: There will be a private memorial service for family and friends of Cooke at 11 a.m. Thursday at Trinity Episcopal Church in Upperville, Va. In lieu of flowers, the family has requested donations be made to the Middleburg (Va.) Community Center.

Pub Date: 4/08/97

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