Asset Titling & Basketball

The Milwaukee Bucks are not in the NBA Finals this season but that has not stopped the franchise from making news. Earlier this year, owner Marc Lasry sold his stake in the team for an eye-watering valuation of $3.5 billion.

Lasry purchased the team in 2014 for $550 million. Ten years and one NBA championship later, he is walking away with nearly 7 times his initial investment.

When asked recently what he plans to do with the windfall of cash, his answer surprised many. He would not be receiving any money. He had titled the basketball team into his kids’ names almost a decade ago.

At the time, he considered this a savvy estate planning move as a way to transfer ownership easily to the next generation after his death since the plan in 2014 was to own the team forever. But in the end, there was an offer that could not be passed up and life and plans changed.

This created several interesting financial consequences for the family:

• Overnight, his five children had each become multi-centi-millionaires with complete control over the majority of their inheritance

• A huge tax bill was now due for each of them

• Lasry had now given up control of the value he had created. The risk of managing the money along with investment and spending decisions now belonged to the young adult children

Lasry, a successful investor in the category of distressed debt, said he has tried to persuade his children to invest using a similar philosophy to his own but has yet to convince them. Instead, they are each pursuing their own approaches to managing and investing their newfound wealth.

It is common for parents and children to disagree over the best uses for money. Many times a solution is to introduce a third-party relationship, like the family advisor, to serve as a sounding board and offer solutions that are good for everyone.

As financial planners, one of our roles is to help coach the next generation to be well-equipped to handle a transfer of wealth and make intelligent decisions regarding taxes and asset location. This usually begins long before an inheritance situation as younger generations start making money decisions of their own.

Marc Lasry’s story is also a great reminder to consult with professionals when considering the important decision of changing titling on accounts or properties. Good advisors and estate planning attorneys can help uncover blind spots by painting out possible scenarios and the consequences that could occur as a result.

After all, we never know what the future will bring or what offers might come along to shake up life.