By Brent Hunsberger, The Oregonian
December 30, 2009, 8:56PM
NIKE FOUNDER AND CHAIRMAN, PHIL KNIGHT
Phil Knight, two months shy of 72, has kicked into serious estate-planning mode, tapping a good friend and former University of Oregon athletic director to help out.
In his largest stock move to date, Nike’s chairman and co-founder on Wednesday gave 20 million shares of his company’s stock, worth about $1.32 billion, to three trusts in his name. Nike disclosed the move in a filing with the U.S. Securities and Exchange Commission.
The person overseeing the trusts, according to the filing: Pat Kilkenny, who served as UO’s top athletics official when Knight donated $100 million to the department.
The filing does not say who ultimately will benefit from the trusts. But estate-planning attorneys say the move is a common way wealthy individuals pass on their fortunes to heirs while reducing their tax liability and still earning income from the assets.
Knight has two children, Travis and Christina. A second son, Matthew, died in 2004 and is survived by a wife and two sons.
Nike spokespeople did not return messages seeking comment Wednesday.
Knight has sold Nike stock on a fairly regular basis in the past, including about 5 million shares in October. But this is his largest single move, representing nearly one-quarter of his stake in the world’s largest sportswear company.
He still owns 65 million shares worth about $4.3 billion, the filing shows. Nike shares closed Wednesday at $66.14 on the New York Stock Exchange, just 29 cents off a 52-week high. The stock has gained 30 percent year-to-date.
Knight split the shares among three grantor retained annuity trusts. The so-called GRATs pay an annuity at a fixed annual rate, most likely, in this case, to Knight. The trusts can be set up for any amount of time or for the rest of Knight’s life.
When the trust ends, any remaining amount would be passed on to beneficiaries tax-free. And if Nike’s stock grows in value as it should, plenty should be left. Knight will pay taxes this year on the gifts but generally at less cost than if he waited or held on to the stock until death, attorneys say.
Knight’s choice of Kilkenny as trustee illustrates the close relationship between the Oregon alumni and Ducks donors. Attorneys generally discourage naming family members or employees as trustees and often appoint professionals or institutions.
Kilkenny, a former insurance company executive who presumably has little experience overseeing trusts, could not be reached for comment.
“If you have a really good friend that you trust, that’s the person you want as your trustee,” said Jonathan D. Mishkin, an estate-planning and tax attorney at Harrang Long Gary Rudnick in Portland. He also teaches at Oregon law school.
Kilkenny also gets the duty of accounting for trust income and deciding when to unload stock.
“He has to decide when to hold and when to fold,” said Kay Abramowitz, an estate-planning attorney at Ater Wynne in Portland.
Knight’s Nike shares give him authority to pick nine of 12 Nike board members. But he converted his Class A shares to Class B shares, which lack the same appointment authority, before donating the stock to the trusts.