Fellow Americans, every year we gather to cheer on teams as they battle on the gridiron. But now that the haze of Superbowl fever has lifted, let’s turn out attention to an interesting intersection of America’s favorite sport and estate law. In June 2019, Paw Bowlen, the owner of the Denver Bronco’s died. With no named owner to lead, the team was managed by the trustees of his trust. It has been reported that Bowlen’s wishes, as laid out in his trust, were for his children to undergo a qualification process before one emerged as the leader. Unfortunately for the family, this didn’t happen. And after much legal wrangling over the past three years, the trustees are working to sell the team. This sale actually sparks a few questions about trusts, trustee duties, and how trusts actually work in action.
Trusts 101
As a quick reminder, let’s step through the roles of a trust. First, there is the person who sets up and funds a trust. They are known as a trustmaker or grantor. A trust is funded with money or property. Property can include real estate, intellectual property, or a professional football team. A trust is managed by a trustee. The trustee does not own the property, they simply manage it on behalf of the next person. The person who receives the benefit of the trust is the beneficiary. The beneficiary also does not own the property, they simply receive the benefit of the trust proceeds. To put faces to these terms, Pat Bowlen is the grantor, his children are the beneficiaries, and Joe Ellis, Rick Slivka, and Mark Kelly are the trustees.
Preparing and Adjusting for the Future
Normally when a grantor makes a trust, the goal is for the trust document to control how money and/or property is managed and distributed. Yet without a crystal ball, it is impossible to draft a trust which can account for all possibilities. So while it may be important that the family farm (or the professional sports team) remain owned by the family, sometimes that’s just not possible. A trust will include language allowing for changes to be made if it is in the best interest of the beneficiaries.
A Trustee’s Duty
This blog has touched on the topic of trustee fiduciary duty in the past, and attempted to explain the level of care a fiduciary (such as a trustee) should exert when acting in their role. The shortest way to phrase a fiduciary duty, is that the trustee must always be acting in the beneficiary’s best interest. Texas law places many rules, referred to in the law as duties of the trustee, these include the Duty of Loyalty, Duty of Full Disclosure, the Duty to Make Property Productive and Duty to Diversify apply most to the Pat Bowlen Trust.
Unless otherwise stated in the trust document, a trustee has the responsibility to prudently invest the trust property and make it profitable. This can sometimes include selling unproductive property and wisely reinvesting that money into more productive investments.
It may be hard to imagine a team currently valued at $4 billion dollars as unproductive property. Yet, ask around and it becomes clear the team has been suffering for lack of clear leadership in the years since Bowlen’s death. Part of the trustee’s fiduciary duty is to take this dip in value into account, along with the internal legal strife between the beneficiaries, and to make the most prudent decision for the benefit of the trust’s beneficiaries. Meaning, that while Pat Bowlen clearly wanted the team to remain within the family, the most beneficial decision is to sell.
Being Named as a Trustee
It’s unlikely that many of us will ever be called upon to manage a trust with assets in the billions of dollars. Yet, being named as a trustee or successor trustee is often a larger responsibility than it seems at first. Thankfully, Texas law does not require you do everything on your own. The law does allow trustees to hire professionals to bring their expertise to help the trustee meet their various duties.
If you have been named as a trustee in your loved one’s plan, or if you have an estate plan and have questions about the responsibilities you are leaving for your trustees, we are hear to answer your questions. Nielsen Law PLLC provides family-focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.
