> Proper planning is necessary to keep a closely-held business in the family.
> Failing to plan for ownership and financial transitions can lead to a forced sale or family conflict.
> Trust ownership can allow for a smooth transition without the asset having to pass through probate court.
Bud Adams, owner of the Tennessee Titans, passed away in October 2013, survived by his two daughters, Susie Adams Smith and Amy Adams Strunk, and the children of his late son, Kenneth Adams III. Adams purchased the franchise for $25,000 in 1959. In 2013, the Titans franchise was valued at $1.055 billion by Forbes magazine, while Adams’ total net worth was estimated to be $1.25 billion. According to reports, Adams left the franchise equally to his two daughters and the children of his late son by way of his trust and also had the foresight to set aside funds that would cover estate taxes on the franchise. However, the future of the franchise remains uncertain due to the lack of a clear business succession plan.
The NFL and the Titans have kept the details of the dispute fairly private, but the latest report indicates that the family has attempted to make Strunk the controlling owner by way of a simple agreement amongst the owners. However, such an agreement alone does not satisfy the league’s requirement of having a single person with the clear, legal power to make team decisions.
The NFL, which has a reputation for being controlling, has long resisted allowing trust ownership of teams since the controlling trustee or successor may not be league-approved. In May 2015, the NFL voted to allow irrevocable family trusts to own stakes in teams and it dropped the percentage an owner is required to control to as low as five percent. As team values continue to skyrocket and longtime owners age, the NFL will have to make exceptions to its ownership succession rules if it wants to maintain ownership stability.
Avoiding a Forced Sale or Conflict
While most families do not own a billion-dollar NFL franchise, many do have income-generating assets that, without proper planning, may have to be divided or sold upon the owner’s death. This may be a rental property, operating business, farm or valuable collection. Regardless of the type of asset, it is important to anticipate and prepare for an eventual transfer.
A primary concern for such assets is whether the estate has sufficient liquidity to pay estate taxes and operating expenses following the owner’s death. If a business is the primary asset of an estate that lacks liquidity, this issue can be addressed through life insurance. Upon the owner’s death, the insurance proceeds are available to the estate to pay estate taxes, avoiding a forced sale of the business in what may be a deflated market. Since Adams prepared for the transfer taxes that would be due upon his death, his family has been able to retain ownership of the Titans.
In addition to liquidity, it is important to have an ownership succession plan in writing. If one of the heirs is more involved in operating the business, leaving a controlling share or appointing him or her to a management position can allow that individual to retain operating control of the business. Where there are sufficient assets to do so, leaving the business to one heir while leaving equivalent assets to another can reduce the likelihood of conflict. Unfortunately, even though he was grooming his grandson to manage the franchise, Adams did not name a controlling owner or leave an ownership plan that meets the requirements of the NFL, resulting in the current conflict between the league and the family.
The most important aspect of a transition plan for any asset is trust ownership. By holding an asset in trust rather than outright, the asset can avoid probate and continue to be managed by the trustee of the owner’s choice without having to go through a transition period. In many situations, the delays and restrictions of probate can be very expensive to the heirs of the estate.
In some cases, having a family meeting while all interested parties are living and healthy may help prepare the family for the eventual transition. In other cases, it may be necessary to include a corporate planning attorney in your estate planning to ensure that any corporate transactions, including a sale or distributions of profits, are understood by all parties. Regardless of the family circumstances, a family business requires specific attention when it comes to a comprehensive estate plan.
 “Bud Adams, Tennessee Titans’ Billionaire Owner, Dies at 90.” Solomon, Brian, Forbes Magazine, Oct. 21, 2013.
 “Titans ownership issues trace to lack of clear succession plan.” Florio, Mike, Pro Football Talk, Jan. 26, 2016.