Many wealthy families in California would do well to consider the creation of family limited partnerships. These estate planning devices can be useful for asset protection, and they can also facilitate asset transfers at a tax discount.Asset ProtectionFirst we would like to take a look at the asset protection that is afforded by family limited partnerships. If you were to be targeted by a creditor or litigant, your personal assets could be vulnerable if you do not take steps to protect them. … [Read more...]
Asset Protection: Devise A Plan With Expert Guidance
Making sure that your assets are distributed to your loved ones in accordance with your wishes is clearly something that must be accomplished when you are planning your estate. But at the same time, it is a good idea to understand how everything is connected.Your overall financial plan should blend into your retirement plan, and ultimately inform the legacy that you will be leaving behind after you pass away. For this reason, it is wise to work within an intelligently conceived financial … [Read more...]
2nd Update – Valuation Discounts – Thomas H. Holman Jr. et ux. v. Commissioner; No. 08-3774 (7 Apr 2010)
In a 2-1 split decision, a recent Court of Appeal agreed with the IRS that an FLP with holdings that consisted only of Dell corporation stock had no legitimate business purpose, but was primarily an estate planning device. The dissenting opinion disagreed stating that maintaining family control is a legitimate business purpose.If the underlying asset had not been a highly liquid, publicly traded stock, I might agree with the dissenting opinion, but I have to ask myself how some members of the … [Read more...]
Update valuation discounts – Thomas H. Holman Jr. et ux. v. Commissioner; No. 08-3774 (7 Apr 2010)
While not earth shattering, a Court of Appeal just issued a ruling in the above referenced case.First, in the facts are that parents created an FLP and transferred into it their substantial holdings of Dell stock. Five days later, they gifted some of the FLP ownership interest to their children. When they filed their gift tax return they claimed valuation discounts.The IRS argued that the transfer of the FLP interest was tantamount to a gift of the Dell stock and thus no valuation discounts … [Read more...]
Family Limited Partnerships
A family limited partnership (FLP) is not uniquely different from a limited partnership except that the participants are generally limited to family members and an FLP is often structured to receive special estate tax treatment. However, I personally haven’t created a limited partnership in years. Why?A limited partnership is required to have one or more limited partners, and one or more general partners. The general partners have UNLIMITED liability for the partnership debts, so any time you … [Read more...]
