An In-Depth Look into the Recently-Created Utah Jazz Dynasty Trust
On January 23, 2017, Utah Jazz owner Gail Miller and her family announced the transfer of the Utah Jazz and Vivint Smart Home Arena into a dynasty trust, also known as a “legacy trust.” The move is believed by many to be unprecedented in NBA history. The trust will ensure that the Utah Jazz remain in Utah and that the franchise remains in the Miller family for future generations. According to Miller, the move was “part of a big package of estate planning. But it’s one part that’s all done and it will last forever, as long as we have people who are willing and able to take care of it.”
Dynasty (or Legacy) Trusts Defined
A trust is a legal relationship in which one party (the “grantor”) transfers assets to another party (the “trustee”) for the benefit of a third party (the “beneficiary”). Though there are many variations of trusts, they are usually either revocable (able to be changed or terminated) or irrevocable (unable to be changed or terminated).
A dynasty trust is a generation-skipping trust, a trust in which the contributed assets are passed down to the grantor’s grandchildren, not the grantor’s children. The generation to which the grantor’s children belong skips the opportunity to receive the assets to avoid the estate taxes (taxes on an individual’s right to transfer property upon his death) that would apply if the assets were transferred to them. This type of trust permits an individual to pay the estate tax once on assets placed in the trust, and the beneficiaries are allowed to use the property while the assets are in the trust and enjoy the income of the trust during their lifetime. Meanwhile, transfer taxes don’t have to be paid on future transfers until the trust ceases to exist. Additional benefits of the trust include asset protection for the beneficiaries. Because the assets are placed in a trust, any future creditors of the beneficiaries cannot reach the assets. This is especially important when considering possible future law suits.
Gail Miller will serve as the trustee, and eventually will cede control of the franchise to a six-person board of managers, composed of members of her family. The board will need either a majority or a supermajority, depending on the nature of the business, to make future decisions for the franchise, attorney and former Utah Jazz President Dennis Haslam said.
According to officials, the formation of the trust means all profits from the NBA franchise will be reinvested in the team so that the “trust will not provide any material benefit to the family from the Jazz.”
Perpetual Ownership of the Jazz
In common law, there is what is known as the Rule Against Perpetuities, which forbids instruments such as wills and trusts from tying up property for too long a time beyond the lives of people living at the time the instrument was written. Courts developed the rule in the seventeenth century in order to restrict a person’s power to perpetually control the ownership and possession of his property after his death and to ensure property transferability.
However, some states by statute have done away with the rule against perpetuities and some have increased the length of time a trust can hold assets. In Utah, the law allows trusts to last 1,000 years. Assuming the Miller legacy trust utilizes Utah’s maximum time frame for trusts, the Jazz could be owned by the trust for 1,000 years. “It is as close as possible to there being perpetual ownership of a professional sports team,” son Greg Miller said.
The Millers have been working for the past 12 months to complete the deal with the NBA. The trust will grant the Miller family multiple tax benefits as a result of its structure. To learn more about dynasty trusts, please contact our office today.