What do the Boston Celtics Have to do With Estate Taxes?

The Boston Celtics recently won a historic 18^th NBA Championship. The Celtics organization is storied and successful, and one of the most well-known professional sports teams with fans across the globe. While Celtics fans have been celebrating their latest championship and the string of contract extensions that have followed, they were not expecting to see a release from the Boston Celtics stating their ownership group intends to sell the team.

The team is currently owned by Boston Basketball Partners LLC, with majority control being held by the Grousbeck family. The statement regarding the sale of the team stated that the Grousbeck family intended to sell their interest in the team for ‘estate and family planning considerations.’

Despite being interviewed on CNBC regarding this statement, Wyc Grousbeck, one of the leaders of the Celtics ownership group, declined to expand on what he meant by “estate and family planning considerations”. While I can neither confirm nor deny this, I can speculate as to the true purpose behind the sale: taxes!

Before I go any further, to best understand what I mean by this, I must explain the concept of estate taxes.

Estate Tax

In simplest terms, the estate tax is a tax imposed on anything the decedent owns at death or in which the decedent has an interest in at death.

Just like most taxes, there are federal estate taxes and state specific estate taxes.

While federal estate taxes are imposed across the board, not every single state imposes an estate tax. For example, in Michigan (where I live and practice), there is no longer an estate tax. However, we’ll come back to this.

Federal Estate Taxes

As mentioned above, the federal estate tax is very much law and fair game. It ranges from rates of 18% – 40%. Notably, the estate tax exemption is currently VERY high! This means that most of us will not be subject to this tax (if we were to die this year). By way of example, the 2024 federal estate tax exemption is $13.61 million per individual. Would if I could say that this number will always go up (because … inflation), but that is not the case. The federal estate tax exemption is determined by the political and economic climate. Meaning that at any time, this exemption could be higher, lower, or the tax could, simply put, become extinct.

Just look at one state specific estate tax…

Michigan Estate Taxes

The Michigan Estate Tax Act was adopted in 1993. For persons dying after September 30, 1993 and before January 1, 2005, a Michigan Estate Tax Return had to be filed only if a federal return was required to be filed. For a Michigan resident decedent, the Michigan estate tax was equal to the maximum allowable state death tax credit. Under the Economic Growth and Tax relief Reconciliation Act of 2001, the state death tax credit was reduced over a period of years and was eventually eliminated in 2005.

Since the state death tax credit has been fully eliminated and since the Michigan estate tax was equal to the amount of the state death tax credit, there is no Michigan estate tax required for decedent’s dying after December 31, 2004.

Sports Team Owners and Estate Planning

Now, back to the Celtics:

The Celtics group is led by Irving Grousbeck and his son Wyc Grousbeck. They bought the team in 2002 for $360 million, at the time the highest price paid for an NBA team. As the story goes, Irving Grousbeck is turning 90 years old this year (2024), and his estate planning over the past few years has centered around what happens to the family’s most valuable asset when it ultimately passes to the next generation.

Wyc is one of four children, and while he’s been hands-on as team governor, his three siblings may feel differently about keeping the team in the family. The Celtics have appreciated about 14 times over the course of their ownership – that’s a lot of money tied up in an illiquid asset. The sale tells us that the family ultimately decided to turn their interest in the team into cash – rather than wage war with estate taxes.

Think about it like this: The Celtics team is estimated to be worth over $4 Billion. So, if Irving were to pass away and his children inherited his interest in the team – that would be a hefty tax bill. Further, Massachusetts is among only 12 states that have an estate tax and unfortunately for the Grousbecks, the Massachusetts estate tax exemption is (only) $2 million.

While I understand that for most families, the stakes are not as high, an estate plan is nonetheless a necessity. If you’re interested in discussing estate tax planning or simply need a plan of your own, call Denise Medina at Fausone & Grysko at (248) 380-0000.