Valuable business interests or family assets can incur substantial estate taxes. One method for passing these interests to future generations is the family limited partnership, or “FLP.” The estate planning attorneys of Shatz, Schwartz and Fentin have helped clients use these special entities to minimize estate tax.

Creating a business solely for estate planning purposes may seem unusual, but it can be highly effective. Generally speaking, an older family member as limited partner creates a business using assets like stocks and bonds. Then, fractional gifts of business interests are made to children as general partners. The value of those interests for estate tax purposes can then be discounted for lack of marketability, lack of control, and built in capital gains. Please see Valuation Discounts and Gifting Programs for more about valuation discounts.

Special care is needed in the drafting of FLP documents to ensure they comply with IRS rules. Please call us if you are interested in learning more about FLPs or other advanced estate planning techniques.