Family Partnerships: Navigating the Discounting Rules for Family-Controlled Entities

Lack of Control, Lack of Marketability, and Minority Discounts

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Tuesday, November 29, 2022

Recorded event now available

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Course Materials

This course will provide trust and estate advisers who work with high net worth individuals and partnerships with a thorough review of family-controlled entities and valuation discounts. The speakers will discuss the current landscape of family entity structures after Estate of Nancy H. Powell v. Commissioner, valuation discounts for lack of marketability, lack of control, and minority interests, and the interplay between estate planning and income tax, particularly concerning planning to obtain a step-up in basis upon death.

Description

With potential legislative changes halted, the ability of taxpayers to claim valuation discounts for both lack of control and lack of marketability in family-controlled entities has survived. Consolidating assets in an FLP or other family entity, as well as obtaining other nontax benefits, remains an effective tool to manage assets and potentially reduce estate, gift, and GST tax.

In Estate of Nancy H. Powell v. Commissioner, 148 T.C. No. 18 (2017), the Tax Court applied Section 2036(a)(2), the less common arm of Section 2036. It stated that since, in conjunction with the other partners, the decedent could dissolve the partnership, the decedent had retained an interest in the assets, which were consequently pulled back into the estate at their date of date value. This ruling has caused trust and estate planners to take a fresh look at FLPs and closely held entities in estate plans. Trust and estate advisers working with family wealth need to understand how to consolidate and protect these assets by transferring assets to closely held structures, which may be eligible for valuation discounts for transfer tax purposes.

Listen as our panel of wealth transfer experts explains using closely held family entities and valuation discounts to preserve family wealth.

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Outline

  1. Estate planning with closely held family structures
  2. Family held entity structures
  3. Tax and nontax benefits
  4. Valuation discounts
  5. Section 2704
  6. Relevant Cases
    1. Estate of Nancy H. Powell v. Commissioner
    2. Estate of Howard V. Moore v. Commissioner
  7. Reporting FLP transfers on federal gift tax returns

Benefits

The panel will discuss these and other important issues:

  • How Powell influences estate planning
  • Walkthrough of another recent FLP case, Estate of Moore v. Commissioner, T.C. Memo. 2020-40, which raises a myriad of estate planning issues
  • Section 2704 and its impact on FLPs, LLCs, and other family-controlled entities
  • Applying lack of control and lack of marketability discounts
  • Determining clients best suited for FLPs and valuation discounts

Faculty

Bernard, Daniel
Daniel R. Bernard

Partner
Twomey Latham Shea Kelley Dubin & Quartararo

Mr. Bernard is a partner in the firm and member of the Trusts & Estates Department. He focuses his practice on...  |  Read More

Weeg, Christopher
Christopher C. Weeg, J.D., LL.M., CPA

Attorney
Comiter Singer Baseman & Braun

Mr. Weeg is an attorney and a CPA with a focus on tax and estate planning. His law practice includes drafting wills and...  |  Read More

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