The Utah Jazz upset the Los Angeles Clippers and advanced to the second round of the NBA playoffs today. But even some of the most loyal NBA fans probably didn’t know that thanks to a recent move by the team’s owners, the Jazz are now owned by a “Legacy Trust” and will likely be sticking around in Utah for generations to come.
The team’s now former owner, Gail Miller, and her husband Larry purchased the team for a mere $26 million in 1985. According to Forbes, the team is currently worth $910 million! Needless to say, even though the Jazz have never won any championships, that’s an incredible investment.
A Legacy Trust, also known as a dynasty trust isn’t going to help the Miller Family with future draft picks or help fund stadium construction, but it is going to provide a host of tax advantages and preserves ownership inside of the family.
In particular, a legacy trust offers high net-worth families several benefits:
Protection from the Generation-Skipping Transfer Tax:
The Generation-Skipping Transfer Tax (GSTT) imposes a 40% tax on transfers to related persons more than one generation younger than the donor. In 2017 the first $5.49 million per year in transfers from an individual to a legacy trust are exempt from taxation. The primary tax benefit is that a donor can begin donating to the trust decades in advance of their death. The assets in the trust may then apreciate without the principal ever being subject to estate taxes.
Rather than pay the estate tax on family assets with the death of each generation, families may put their assets into a Legacy Trust. Trusteeship and the right to receive money from the trust is heritable, and grandchildren as well as your children will be able to pull assets from the trust without tax penalties.
Protection from creditors and divorce:
Legacy trust assets cannot be accessed by creditors and parties who have brought a lawsuit against your family. Family legacy trusts are further considered separate property in the event of divorce and will not be divided if your heirs divorce.
Legacy trusts are not subject to probate upon death, and their beneficiaries are not a matter of public record. Avoiding probate court means avoiding personal representative fees, attorney’s fees, and estate appraisal fees. We covered the probate process and its costs in two previous posts
What’s the catch?
The primary drawback of a legacy trust is that it will reduce your control over the assets it owns. Generally, the donor cannot be the trustee.
In the case of the Jazz, Miller will eventually hand over control to a six-member management board composed of her family members. The deal took over a year to design and to receive approval from the league and was part of Gail Miller’s overall estate planning strategy which was intended to save on estate taxes and preserve the family fortune. Miller, who is described as Utah’s wealthiest person, put it best, “We view the legacy trust literally and figuratively as passing the ball and all it stands for to future generations of our family members, fans and employees,” Miller said.
Legacy trusts allow large assets like a company or a NBA team, as well as successful small family businesses to remain intact, without the risk of a breakup due to estate taxes or shareholder disagreements.
If you would like to ensure that your estate will be protected from probate and unnecessary taxation, contact Yaser Ali Law for MVP service.