Ralph C. Wilson Jr. was adamant that he wanted to remain the sole owner of the Buffalo Bills while he was alive, and he was passionate about keeping the team in town.
But he also may have had a financial incentive for not selling the NFL franchise before his death Tuesday.
If Wilson had sold the team while he was alive, he might have had to pay income taxes based on the profit from his 1959 investment of just $25,000. The team is valued at $870 million.
When the team is sold now, however, his heirs or estate would likely pay capital gains taxes based on the difference between the value of the team at the time of his death and the eventual sale price.
The capital gains taxes are separate from estate taxes – another factor that could have affected any decision about the team.
“We normally tell people like Ralph Wilson, ‘Do not sell the team if you’re getting old because the appreciation is tremendous,’” said Daniel S. Hoops, an attorney who specializes in estate planning and is a professor at Walsh College in Michigan, where Wilson’s estate is likely to be settled.
These are the types of issues, estate attorneys say, that Wilson would have been thinking about as he planned for what to do with the Bills and other assets after his death. Those taxes – capital gains, estate and other federal and state levies – also could have been at the heart of whatever decisions the 95-year-old owner made before died.
“The major issue is the estate tax consequences of whatever he plans to do,” said David H. Alexander, an estate attorney with Gross Shuman Brizdle & Gilfillan in Buffalo.
Wilson, famously, did not like talking publicly about how his estate would be handled after his death. Though he made a commitment to keep the Bills in Orchard Park for his lifetime, and agreed last year to a 10-year stadium lease, he gave only one key detail of how he envisioned the future of the team after his death.
The team will be sold, he told The Buffalo News in 2007. He did not have any interest in giving it to his wife or his children to run.
“It hasn’t changed,” Wilson said then about his estate plans for the team. “I know the people are jumpy there. But I get jumpy the more I hear about it.”
Team and NFL sources have previously told The News that the Bills would be put into a trust when he died. That keeps the team’s management in place as the details of his estate are settled. A trust also could shield some of his bequests from public view, Alexander said.
If it were a trust, then “hardly anybody will know what its provisions are,” Alexander said.
Estate planning – especially for the wealthy with varied assets – can be a complicated process guided by a number of goals. In Wilson’s case, that could include who the heirs might be, what he wanted for the team and what types of taxes he hoped to minimize.
“It can be somewhat of a complex set of pieces to arrange on the chess board to figure out where things need to go,” Alexander said.
When it comes to taxes, there are two types that attorneys say Wilson might have been thinking about when it comes to a transfer of ownership of the football team. There are capital gains taxes – a type of income tax paid on investments once they’re sold. And there are estate taxes – those paid by the wealthy when they transfer property to heirs other than a spouse.
Wilson would have paid a different amount of capital gains taxes on a sale of the team before his death than his heirs would pay when the team is sold. But any scenario regarding those taxes would be complicated by what federal estate taxes his heirs will owe. And estate taxes – which can be as much as 40 percent – can be quite high, depending on what arrangements Wilson made, attorneys said.
“I’m sure for an asset of this magnitude, a substantial amount of planning was done,” Alexander said, “evaluation of the different choices, the costs, the benefits and how those things affect Mr. Wilson’s, shall we say, game plan for what things ought to go on now and in the future.”
Those estate taxes also could be part of the decision to sell the team.
“If the team’s worth $800 million, multiply that times 40 percent, someone’s got to come up with $320 million at some point,” Alexander said.
Some estate planners, Hoops said, will advise a client such as Wilson to use a life insurance policy to provide cash to help pay estate taxes.
But even the best estate planning, he said, can fail to account for problems that arise after a death.
“You can have the greatest written estate plan in the world, but it just comes down to the family and the people that you put in as your decision makers,” Hoops said.
For example, Hoops pointed to the estate of former Detroit Pistons owner William Davidson. The Detroit Free Press has reported that Davidson, who died in 2009, set up trusts for his heirs but that family members got caught up in a dispute over control of a charitable trust.
“I’ve never heard anything cross about anybody in Ralph Wilson’s family or the people he chooses to handle some of his business,” Hoops said. “So I would be shocked if we heard anything like that from his estate.”