While these two teams never met on the playing field, their two iconic owners faced very different fates in the game of life. George Steinbrenner, who died recently at the age of 80, certainly came out ahead of Joe Robbie, the former owner of the Miami Dolphins who died in 1990. A victory for his heirs and his legacy. Steinbrenner’s timing couldn’t have been better. His heirs will inherit the team without having to pay any estate taxes on an estimated $1.1 billion estate. The New York Yankees, which he acquired in 1973 for $10 million, are now worth $1.6 billion but are 95% leveraged due to debt from the new Yankee Stadium.
Because Steinbrenner died in a year when there is no federal estate tax, he potentially saved his heirs a 55% estate tax on his assets — or a tax bill of about $600 million. The 55% tax takes effect on January 1, 2011. If Steinbrenner had died in 2009 when the estate tax rate was 45%, his estate tax bill might have been nearer $500 million. Because the ultra-wealthy often do elaborate planning, putting assets into trusts taxed separately from the estate or into foundations that are tax-exempt, it is unclear how large his estate will be. Estate taxes may also be postponed on assets left to a spouse in years when there is an estate tax.
There is no estate tax this year due to changes made by Congress in 2001. Those changes eased the estate tax over several years and culminated with its repeal this year, followed by a return to high tax levels in 2011. This year’s lapse potentially provides huge windfalls for the very wealthy, like Steinbrenner. Other billionaires who have died this year include Houston energy magnate Dan Daniels and real estate developer Walter Shorenstein.
Contrast this with Joe Robbie. When he died in 1990 the heirs had to sell the football team and the stadium at fire-sale prices in order to pay a staggering $47 million estate tax bill.
Joe Robbie was an American success story. He was a successful entrepreneur and co-founder of the Miami Dolphins, a franchise that turned into one of the highest profile and most lucrative teams in professional football. During his span as owner, Robbie and Coach Don Shula led the Dolphins to an unfathomable 14-0 perfect season, won two Super Bowls and built $115 million Joe Robbie Stadium entirely with private capital. Unfortunately even the stadium had to be sold along with the team and it no longer bears Joe Robbie’s name.
Like many owners of family-run businesses, it was Robbie’s dream to have his family follow in his footsteps when he was gone. Unfortunately, Robbie never planned to deal with estate taxes. He died on January 7, 1990. Through the marriage deduction, he passed to his wife the illustrious franchise and the stadium which bore his name. Unfortunately, his wife passed away soon thereafter, and due to a lack of planning, a staggering estate bill estimated at $47 million was left behind. Differing views amongst his nine children only exacerbated the situation and forced the cash-poor family to sell Robbie’s legacy he had worked so hard to build. In 1994, the family sold both the team and the stadium for a total of $138 million. At that time, the sale price, even after estate taxes, was impressive. Today, many would argue that the Dolphins and the stadium — now known as Pro Player Stadium — might be worth twice as much.
What Could Be Done Differently?
All parents dream about giving their children opportunities that they never had, creating a family legacy. But when it comes to thinking about estate planning, many put off the idea. Had the Robbie’s properly planned, they would have been able to ensure their legacy for generations to come.
Although it might seem that both the Steinbrenner and Robbie family heirs are quite well off, it really isn’t just about money. More important, Robbie’s intentions were defeated; his family was removed from the success he worked so hard to build. Estate planning affects the heart as well as the pocket book.
George Steinbrenner once said, “Winning is the most important thing in my life, after breathing.” In the game of life, it appears that Steinbrenner had one final victory, and he has ensured that his family’s legacy will live on.
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The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm. Securities offered through an affilliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.
Wall Street Journal – July 13, 2010 How Steinbrenner Saved His Heirs a $600 Million Tax Bill
John Petrick – Joseph “Joe” Robbie: Personal Foul, $47 Million Penalty on the Estate