The Family Partnership represents
one unique way you can transfer your business within your family. Accordingly there are several advantages in
doing this. Let’s briefly discuss the
most prominent advantages.
First, it is an excellent
way to reduce your federal and/or New York State estate taxes. The basic premise behind this form of a partnership
resides in the fact you are GIFTING interests to junior-generation family members. In effect, you are removing these assets from
your estate and as a result these assets are not technically owned by you. In effect, you are freezing the growth of
some assets.
Secondly, even if the
junior-generation family members “screw up”, that should not be an issue as YOU,
the senior-member, as General Partner still maintain control of the day-today management
of your enterprise.
Third, TAXES are always an
issue and for many taxes are on the rise (consider the additional Medicare tax
of 3.8% on some taxpayers). So with a
structure within the Family Partnership, the income producing assets can be transferred
to other family members who are more than likely in a lower income tax
bracket. This is why it’s so vitally
important to have your CPA along with you financial advisor in such
discussions.
Moreover, it provides a
considerable degree of flexibility than other estate freeze techniques. For example, you as a General Partner can
generally terminate the Partnership.
This could happen when some partners do not want the underlying assets
or simply want to get their hands back on certain assets. Times, events and circumstances do change so
FLEXIBILITY is an important factor.
Lastly, because of issues
of MARKETABILITY and MINORITY CONTROL, you can take a discount on the value of
certain assets in your enterprise. Keep
in mind that the ever-watchful IRS carefully monitors such discounts. Thus, it is prudent to decrease the values by
no more than twenty-five (25) percent.
Throughout this forum I
have advocated the team of a Certified Financial Planner, a CPA and an Attorney
coordinating discussions in making estate and business organization strategies. The use of a Family Limited Partnership is a
perfect example of the need for this approach.
While I do like the use of such a technique, please keep in mind it is
not meant for everyone. I have many articles on this topic and I would be happy to provide you with them. You can email or call with any such requests.