Setting up a family partnership or LLC and transferring assets to the entity is a popular estate planning tactic. The transfer of certain assets that are considered illiquid, such as minority shares in a family corporation, receive a discount on the value of the asset. This tactic was originally created to protect the family of a minority share holder from having to sell for a bad deal in order to pay an inflated tax bill. However, estate planners seized on the rule and began to create entities that, while technically in compliance, violated the spirit of the valuation break by transferring items like a personal art collection and still getting the discount. The new regulations are expected in September and many planners are having clients form the entities now in order to protect against any changes.
See Robert Milburn, IRS Considers New Tax on Wealthy Families, Barron’s, June 30, 2015.
