This week, on January 23, 2017, Gail Miller and her family announced that they had transferred their ownership in the Utah Jazz to a legacy trust. As stated in their press conference, they did so, in part, because they want to ensure that the Utah Jazz remain in Utah for as long as possible.
So what is a legacy trust and how does it keep the Jazz in Utah?
OVERVIEW OF LEGACY TRUST
To begin, it is important to understand what is a trust. A trust is an agreement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.
A legacy trust, also known as a dynasty trust, is a type of trust where the assets are held by the trustee (and replacement trustees) over several generations. This is different from standard trusts which typically end on the death of the trust creator or his or her children.
There are two major benefits of a legacy trust:
First, a legacy trust is fully or partially exempt from the 40% federal tax on the transfer of assets to beneficiaries. While this tax only applies to assets greater than $5.49 million, it obviously is a big savings benefit for wealthier individuals.
Second, a legacy trust provides asset protection from creditors. Beneficiaries of a legacy trust generally do not end up owning trust assets and usually have no right to distributions. It is for this reason that the assets are beyond the reach of the beneficiaries' creditors.
HOW DOES A LEGACY TRUST KEEP THE JAZZ IN UTAH?
While the terms of the Miller family's legacy trust will remain private (privacy is major benefit of any trust) we can guess as to a few of the provisions in their trust based on their recent comments:
- Gail Miller will serve as the initial trustee and then cede control to a six-person board of managers.
- The board of managers will need either a majority or a supermajority, depending on the nature of the business, to make future decisions for the Jazz.
- One decision that the trust apparently does not allow the board of managers to make is the decision to move the Jazz out of Utah.
- All profits earned by the trust will be reinvested back into the trust and will not be distributed to the Miller family.
- Lastly, the trust will likely remain for 1000 years since that is the maximum age allowed under Utah trust law.
For Utah Jazz fans everywhere, this is great news! The legacy trust ensures the Jazz are here to stay.
For the Miller family, the transfer of the Utah Jazz to their legacy trust is only part of a larger family estate plan. While most of us will never have to worry about the long-term implications of a sports franchise, we do share the need with the Miller family to make important decisions regarding our own family estate plan.
At J. Cutler Law, we offer free estate planning consultations for you and your family. We can help you decide what trust best fits your family’s needs.