Wealth Preservation, Trusts and Estates

Family Limited Partnerships, The IRS, and Your Estate Planning
By: David M. Frees III, Esq.

Estate and Trust lawyer David Frees on FLPs

Many affluent families use family limited partnerships as part of their business succession planning, business continuity plans, and as a legitimate part of estate planning.

Limited partnerships allow a person or family own owns real estate, a family business, or even concentrated positions of publicly traded stock companies to accomplish a number of important things. By using a FLP (Family Limited Partnership) the family can divide the ownership of the company or assets from the management. So, a senior generation can continue to operate the business and mentor the next generation while allowing growth in the value of the company to occur in the children’s names.

The interests in FLPs are easy to divide and different family members can own different fractions of the total asset base or business.

The FLP can help to prevent a dissolution of the company upon the death of a senior family member and can provide for continuity of management.

And, when done properly, and when carefully documented, the FLP structure can result in a diminished value of the gift to children or grandchildren.

FLPs can be used in conjunction with both trusts created during your lifetime, or under a will and can also offer some significant asset protection.

The new York Times recently published a great overview of the pros (some of the benefits mentioned above), the cons (IRS scrutiny for one), and what to do to make sure that the FLP works as intended.

Click here to read this great NY TIMES article on Limited Partnerships and the IRS.

Unruh, Turner, Burke and Frees maintain law offices in Phoenixville, Malvern, and West Chester, Pennsylvania.

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In a recent case, the tax payer had a victory over an IRS challenge that sought to include the full value of FLP (family limited partnerships) assets into the decedent’s estate.

Family limited partnerships are often used to manage family businesses, real estate ventures, and even in some cases, publicly traded securities and other more liquid investments. They allow the transfer of assets (in some cases at a discount) while permitting a general partner to manage the assets.

David Frees and Ivanka Trump

However, because in part of aggressive discounting of asset values and for other related reasons, these arrangements have been attacked by the IRS.

In the recent blog posted on www.paestateplannners.com I have linked to an anlysis of the new case and have given some short, and non technical points to remember when doing this type of planning.

When done correctly, family limited partnerships serve many business, and wealth preservation goals.
To learn more click Family Limited Partnerships – A Partial Victory for the Tax Payer.

David M. Frees III
610-933-8069
dfrees@utbf.com
David and his partners and associates in the Wealth Preservation, Tax,
and Corporate sections work with many clients to develop
and implement Family Limited Partnership and Trust strategies
for our clients in Chester County, Delaware County, Lancaster, Bucks,
Berks and Philadelphia counties and throughout Pennsylvania

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