Real Estate

Estate Tax Planning and Family Limited Partnerships

The general partners manage the assets contributed to the family limited company. Limited partners generally have no rights to assets held by FLP. Lack of marketability and fractional ownership of limited partnership interests held by limited partners are two of the well-established abatement principles that decrease the value of taxable estate. The discounts allowed by the restricted rights contemplate the reduction of the value of the assets held by each limited partner, but also increase the number of annual tax-free gifts that can be achieved. Today’s high marginal estate tax rates allow for the wise and prudent planning that is necessary to preserve family wealth.

Centralized Management of Family Wealth
When a corporation is used as a general partner, the general partner controls all assets of the partnership. This corporation may also employ family members and others. It will convene meetings, conduct training sessions and facilitate asset management. With a corporate general partner, continuity must be ensured even in the case of husband and wife.

Minimize sequences
By using an FLP, the time and expense of probate an estate can be greatly reduced. When a living trust is also used, then there is no probate. Living wills are not a public record and, therefore, their contents are known to no one other than those involved in the family.

Cure Title Flaws
The procedure for transferring assets to an FLP can help with the discovery of title defects. This can be a significant problem for real estate assets if not discovered and corrected.

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