It is important to have some understanding of the workings of the gift and estate taxes when you are making preparations for the transfer of your assets. The gift tax carries the same 40% rate that the estate tax carries. Though there is a $5.34 million lifetime exemption in 2014, it is unified with the gift tax exclusion.
As a result, the estate tax exclusion that will eventually be available to you would be reduced by the amount of the gifts that you gave during your lifetime using this exemption. Therefore, gift giving using the unified exemption is not going to provide you with tax efficiency in the long run.
However, there are some tools available that enable you to give gifts at a reduced rate of taxation, and a family limited partnership is one of them. With these vehicles, you as the creator of the partnership act as the general partner. The general partner has full rights of marketability and control.
You could then give gifts of shares in the partnership to family members and they would become limited partners. The taxable value of these gifts would be less than their true value because the limited partners have no rights of control or marketability.
Family limited partnerships can a play useful role in many estate plans. If you are interested in learning more about family limited partnerships and other estate planning tools that provide tax savings, simply take a moment to set up an appointment to speak with an experienced and qualified San Jose estate planning attorney.
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