Tuesday, June 12, 2012
As I have previously discussed, family limited partnerships are a good and useful estate planning tool. The family limited partnership can be used to gift the assets that a person owns. For example, Mrs. Kelly owned a substantial amount of assets, and chose to use a family limited partnership to gift her assets to her children. She created several partnerships and transferred her assets to the partnership. She then created a corporation to act as the general partner of the partnership and made her children the directors of the corporation. Through her partnership, she gifted portions of the partnership to her children. By the time she died, she gifted most of the partnership to her children.
The Tax Court in Estate v. Kelly, held that Mrs. Kelly's estate could not be taxed on the assets that were transferred to the partnership because she no longer had the assets and could not enjoy them.
See Manatt, Phelps & Phillips, LLP, Family Limited Partnerships: Still a Useful Estate Planning Tool, JDSupra, Apr. 27, 2012.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.