The viability of family limited partnerships
Recent tax-court victories have breathed new life into family limited partnerships, a strategy that affluent families have used for years to shelter assets and reduce gift and estate taxes.
Indeed, some financial advisers are telling their clients that when such partnerships are used for what they were originally intended — to protect the assets of a family-owned business, instead of being used as a family piggy bank or for shielding personal property — they stand a much better chance of avoiding challenges from the Internal Revenue Service.
The IRS has increasingly challenged suspected misuses of family limited partnerships in recent years. But tax-court rulings in the past few years have again endorsed the practice when it is clearly used to help preserve a family business for future generations.
The article then makes the following suggestions:
- Keep personal assets out.
- Don’t make it all about taxes.
- Don’t overstuff.
- Have the assets valued by a professional.
Special thanks to Patrick S. Sylvester (Attorney & Counselor at Law, Sylvester Law Firm, PC) for bringing this article to my attention.