Structuring Preferred Partnership Freezes in Estate Planning: Chapter 14 Valuation Rules, Transferring Assets, Basis

CPE credit is not offered on this program

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

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Conducted on Tuesday, June 22, 2021

Recorded event now available

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Course Materials

This CLE course will provide estate planners, advisers, and tax counsel with a comprehensive exploration into the planning and structuring challenges and tax benefits of "freeze partnerships" as a tool for inter-generational wealth transfer. I will discuss how to determine when freeze partnerships are the optimal vehicle for preserving basis, how the partnership freeze differs from other trust-based freeze techniques (specifically Grantor Retained Annuity Trusts and Sales to Intentionally Defective Grantor Trusts), and how to navigate the complex rules of Internal Revenue Code Chapter 14.


A preferred freeze partnership can be a useful and flexible estate planning tool, especially for highly leveraged, low basis real estate. In its most basic form, a properly structured preferred partnership freezes a class of partnership interest by limiting it to a fixed rate of return, thus concentrating the accumulation of growth in the partnership value to the non-frozen interests. Advisers must understand the special valuation rules of Chapter 14 of the IRC to avoid potentially costly tax consequences. Such a structure may also achieve significant income tax savings from a step-up in basis for the retained frozen interest at death.

Structuring a basic freeze partnership involves a taxpayer--usually a parent--contributing assets to a partnership or LLC in exchange for partnership interests that pay a fixed, preferred return. The remaining partners receive common growth interests. In structuring the partnership, advisers must carefully navigate the technical rules of IRC Section 2701-2704 or the transfer may result in a deemed taxable gift.

Freeze partnerships can also be structured in other ways, including the "reverse freeze," and in combination with various other planning vehicles to achieve tax and non-tax objectives, including trusts such as QTIP trusts and CLATs, as part of a comprehensive plan to pass down wealth to future beneficiaries.

Listen as our experienced speaker provides a thorough guide to the benefits, risks, and structuring techniques of preferred freeze partnerships in estate planning.



  1. Structures, mechanics, and operations of freeze partnerships
  2. Gift tax issues to avoid at the formation
  3. Valuation requirements in IRC 2701 - 2704
  4. Reverse preferred partnerships
  5. Recent developments


The panelist will review these and other key issues:

  • Structures, mechanics, and operations of freeze partnerships
  • Differences in various freeze techniques
  • Why clients prefer partnership freezes over other trust freeze techniques
  • Gift tax issues to avoid at formation
  • How not to run afoul of the valuation requirements in IRC 2701 - 2704
  • Reverse preferred partnerships
  • Recent developments


Macklin, Lawrence
Lawrence J. (Larry) Macklin, AEPĀ®

Managing Director & Wealth Strategies Advisor
Bank of America Private Bank

Mr. Macklin coordinates the development and delivery of innovative strategies and solutions for high net worth...  |  Read More

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