By: Barry E. Haimo, Esq.
August 22, 2019
Dan Gilbert, the Fate of the Cleveland Cavaliers, and Estate Planning
All reports point to Dan Gilbert making great strides mere weeks into recovery from a stroke. Still, it’s impossible to know exactly what’s going through his mind.
His estimated $7 billion net worth (which began as $5,000 in pizza earnings) contributes to thousands of lives, so we can only imagine there’s a lot going on – including what could happen with the Cleveland Cavaliers, his array of other holdings, and the future welfare of his entire estate.
No word from Gilbert’s corner yet regarding succession plans for the Ohio NBA team, but if his progress takes an unfortunate turn, here’s what we do know about how things may shake out…
The Cavaliers’ Value Has Quadrupled under Gilbert’s Ownership
The current estimated value of the Cleveland Cavaliers franchise has quadrupled since Dan Gilbert’s acquisition in 2012. Then, its value was only $329 million. Today, the franchise is worth a cool $1.275 billion.
Many owners include their sports franchises in trusts for many reasons including minimizing estate, gift, generation skipping and income taxes.
If Gilbert’s estate planners advised him to place the team in a trust (as they should have), they’ve already saved millions in tax bills for his eventual heirs. But this may not be enough to keep the Cavs in the family. Here’s why…
Other Important Aspects of Gilbert’s Estate
The Cleveland Cavaliers account for only a fraction of his estate – and the taxes that may come with it when the time comes to pass the reins.
Gilbert co-founded Quicken Loans, which has since grown to be the largest online mortgage lender in the country. Out-valuing Wells Fargo in 2017, its estimated worth hovers around $25 billion.
Following years of economic decline in Detroit, Gilbert shifted headquarters to his former hometown. He now employs about 17,000 people there locally.
Rock Ventures, which Gilbert oversees, is the umbrella organization behind his efforts that have been deemed “the overwhelming private force in Detroit’s comeback.”
To help local and state governments rebuild his beloved Motor City, Dan Gilbert has invested in hundreds of real estate and business ventures there. So far, his organizations have collectively sunk $6 billion-plus into this “Motown renaissance.”
The Giving Pledge
Gilbert and his wife also committed to The Giving Pledge when asked in 2012. Founded in 2010 by fellow billionaires Bill Gates and Warren Buffet, the campaign encourages wealthy people to contribute half their net worth to philanthropic causes.
The Gilberts run non-profit research centers, medical clinics, and foundations in Cleveland and Detroit for personal causes, and continue to donate millions each year to higher education.
With stakes this high, the question then begs…
Could the Cavs Wind Up Part of a Gilbert Clan Cash Out?
Currently, only the first $11+ million of an estate’s valuation is exempt from estate tax prior to funds and property changing hands. It sounds like a lot but that’s only about 0.1 or 0.2 percent of Dan Gilbert’s entire net worth!
The rest of his fortune, depending on tax law and his estate planning strategies, could wind up subject to graduated tax levies topping out above 45 percent. This would leave the Gilbert family footing a massive bill from Uncle Sam.
I’m sure the Gilbert family has the best estate planning attorney’s on the payroll to minimize taxes through a variety of strategic vehicles.
When your decisions affect the fate of thousands of employees, dozens of non-profit and community-minded entities, and you’re also trying to ensure your heirs’ future stability, you’ve got big decisions at hand. “Heavy is the head that wears the crown,” indeed.
Just as other families have sacrificed their cash-cow sports teams to “save the farm,” the Cavaliers (and the other teams Dan Gilbert currently owns), could quite possibly wind up on the auction block to protect the fate of the majority of his other holdings.
If you have questions regarding the complicated tax implications related to your estate, an experienced estate planning attorney can assist and advise on the most effective strategies for your personal circumstances. Before you choose, however, be sure you ask the right questions!
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
YOU ARE NOT OUR CLIENT UNLESS WE EXECUTE A WRITTEN AGREEMENT TO THAT EFFECT. MOREOVER, THE INFORMATION CONTAINED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. EACH SITUATION IS HIGHLY FACT SPECIFIC AND EXCEPTIONS OFTEN EXIST TO GENERAL RULES. DO NOT RELY ON THIS INFORMATION, AS A CONSULTATION TO UNDERSTAND THE FACTS AND THE CLIENT’S NEEDS AND GOALS IS NECESSARY. ULTIMATELY WE MUST BE RETAINED TO PROVIDE LEGAL ADVICE AND REPRESENTATION. THIS INFORMATION IS PROVIDED AS A COURTESY AND, ACCORDINGLY, DOES NOT CONSTITUTE LEGAL ADVICE.