Mike Ilitch bought the Detroit Tigers for $85 million in 1992. He died recently at age 87. Because his widow, Marian, owns MotorCity Casino Hotel, she can’t inherit the Tigers under Major League Baseball's rule that prohibits team owners from having any stake in gambling operations. That’s an ownership issue the Ilitchs didn’t have with their Detroit Red Wings, because the National Hockey League doesn’t have a similar prohibition.
As part of estate and succession planning, the Tigers were placed in a trust, and Chris Ilitch, the son of Mike and Marian who has run the team operations since 2004, became the de facto owner and the Tiger’s CEO when his dad died. He’ll decide the financial direction of the franchise, but the real owner of the Tigers is the trust. These trusts offer a way around MLB's gambling rules, reports Crain’s Detroit Business in “Who owns the Tigers? Family plan is a matter of trust.”
Trust arrangements are private, and the Ilitch family isn't saying anything about it. The Ilitch family issued a succession-planning statement in May 2016 that confirmed Chris Ilitch would continue to oversee their holdings, but it didn't give any specifics.
The Ilitch family, owners of the Little Caesars pizza chain, earned a reputation as sports owners willing to spend their way to championships. Under their ownership, the Red Wings won four Stanley Cups. The Tigers won two American League pennants, but no World Series titles.
Successful succession planning should result in a smooth transition. If this is done, the family's financial resources won't get tied up in an inheritance tax battle, which has forced other families to sell their professional sports teams.
Mike Ilitch put the Tigers and other assets into trusts. It’s a common practice that can shield heirs from federal estate tax bills—bills that can be hundreds of millions of dollars for pro sports franchises. The way in which the trust and estate planning has been specifically arranged to shield Ilitch's heirs from a massive estate tax or gift tax bill is unknown.
Some team owners, like Jerry Buss of the NBA’s Los Angeles Lakers, purchased insurance policies to pay estate taxes so that heirs wouldn't get hit with the tax bill. Those estate taxes often force the sale of a team. Estate tax bills from the IRS made the NFL's Miami Dolphins sell in 1993 and St. Louis Rams in 2008. If the Tigers were placed in trust some time ago, the value of the team will freeze under federal gift tax law as of the time the team was put into trust. That's a way to decrease the eventual tax bill, given that sports team values have skyrocketed due to huge local and national TV rights deals and other revenue streams. Forbes most recently valued the Tigers at $1.15 billion.
The value of assets within an estate can be a big fight between the IRS and the heirs, since each puts a value on a team and other assets for tax purposes. That’s why sports team owners create detailed succession plans. The current top federal estate tax rate is 40%, with an exemption for the first $5.49 million (or twice that for married couples). If the Tigers were valued at $1 billion, and $5.49 million was taken off for the exemption, the tax bill would be 40% of the remaining value or $398 million.
If an asset accounts for 35% or more of an estate's value, the IRS says that the tax bill can be spread over 14 years, which is designed to help families keep family businesses. Otherwise, it's due within nine months.
Reference: Crain’s Detroit Business (February 18, 2017) “Who owns the Tigers? Family plan is a matter of trust”