Helps you efficiently transfer property. This is necessary to obtain appropriate discounts:
- Owners of Businesses, Real Estate, and Marketable and non-Marketable Securities can transfer property to their children, grandchildren or favorite charity and significantly reduce estate and gift taxes.
- Parent controls as G.P., child or grandchild or charity is a L.P.
- The value of the asset – the limited partnership interest – may be discounted (by an Appraiser) when computing the gift tax.
- Theory – the L.P. interests are worth less since the L.P. has no control over the Partnership’s activities and the interests are not marketable.
- Use Family Limited Partnerships as a tool for (1) asset preservation, (2) estate planning, (3) family transfers, (4) charitable giving, and (5) income tax planning.
- Form the L.P. while the Owner or investor is in good health and has a reasonable life expectancy. Establish the L.P under state law and run it like a business, preferably with a corporate G.P. that has a Board of Directors.
- Consider adult children or independent 3rd parties as G.P. for key decisions to avoid investor having too much control. Mandate distributions of income.
- Document the purpose of the L.P. – Show non-tax reasons, such as protection of assets from creditors.
- Transfer only business or investment assets – not personal residences or vacation homes – into the L.P.
- Give the investor a minority interest, or less than a controlling interest, in the corporation/G.P., to restrict the investor’s ability to dictate how the L.P. distributes income.
- The investor/G.P. should not be dependent on L.P. distributions for living expenses.
- Document the amount of the gift on the tax return with an appraisal.