Family Limited Partnerships in Estate Planning: Structuring and Income Tax Considerations, Asset Protection

Note: CPE credit is not offered on this program

Recording of a 90-minute CLE video webinar with Q&A


Conducted on Tuesday, January 19, 2021

Recorded event now available

or call 1-800-926-7926
Course Materials

This CLE course will provide estate planners with a practical guide to utilizing family limited partnerships (FLPs) in estate planning under current tax law. The panel will discuss the income tax and asset protection benefits of FLPs, detail how to withstand IRS scrutiny of transfers and operations, and address the interplay between estate planners and income tax advisers, particularly concerning planning to obtain a step-up in basis upon death.

Description

The use of an FLP in estate planning can shelter assets and reduce overall gift and estate taxes. Although the increased estate exemption amount lessens the need to take aggressive valuation discounts on assets transferred into an FLP, the structures retain significant asset protection and income tax savings features.

The general structure of an FLP involves a grantor transferring assets into a partnership, with the grantor serving as a general partner. The general partner then grants limited partnership shares to family members or other potential heirs/beneficiaries.

Estate planners can use FLPs to achieve income tax savings by arbitraging differing income tax rates among limited partner family members. By granting income shares to family members who may be in a lower income tax bracket, the general partner can reduce overall income taxes.

However, under current tax law, there are some complex tax implications in operating FLPs, particularly in determining the availability of Section 199A pass-through deduction to recipients of limited partnership interests under the capital ownership rules of IRC 704(e). Estate planners must grasp a complete understanding of applicable tax rules and recent regulations when funding FLPs through nontaxable transfers and sales, using distributions to shift income tax burdens and their interplay with other planning tools.

Listen as our experienced panel provides a practical guide to funding and structuring an FLP, as well as operating the FLP to withstand potential IRS scrutiny.

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Outline

  1. Using FLPs for asset protection and business continuation/succession planning
  2. Structuring and funding options
  3. Section 199A deduction for FLPs
  4. Income tax minimization opportunities
  5. Using FLPs with trusts and other wealth transfer vehicles

Benefits

The panel will review these and other relevant topics:

  • What are the income tax and asset protection benefits of FLPs?
  • How can you withstand IRS scrutiny in operating an FLP for non-tax reasons under the business purpose rules?
  • Using distributions to shift the income tax burden to limited partner family members with lower marginal income tax rates
  • How does the Section 199A pass-through deduction apply to FLPs?
  • Strategies for funding FLPs through nontaxable transfers and sales

Faculty

Akhavan, K. Eli
K. Eli Akhavan

Senior Counsel
Norton Rose Fulbright US

Mr. Akhavan focuses his practice on domestic and international estate, asset protection and tax planning for high...  |  Read More

Capdevielle, Cliff
Cliff Capdevielle

Managing Attorney
Moskowitz

Mr. Capdevielle has been developing sophisticated tax planning strategies and resolving tax disputes for clients more...  |  Read More

Cohn, Beth
Beth S. Cohn

Shareholder
Jaburg Wilk

Ms. Cohn chairs the firm’s Estate Planning and Business Law Department. As both a Tax Specialist certified by the...  |  Read More

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