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FAMILY
LIMITED PARTNERSHIP A Family Limited Partnership is a way you can remove assets (like a family business, stocks, real estate or insurance) and any future appreciation on them from your taxable estate without giving up control. It is especially useful when real estate or a family business might otherwise have to be liquidated to pay estate taxes. When you set up a Family Limited Partnership, you transfer the assets into the partnership in exchange for partnership shares. You keep the general partner shares and, over time, gift limited partnership shares to your children, removing the value of the gifted partnership interests from your estate. As the general partner, you have full control - you determine how the assets are managed, when income is distributed and how the partnership is run. Limited partners (you and/or your children) are passive - they have no say in how the partnership is managed. Losses and profits are allocated among the partners, but no income is distributed unless you, as the general partner, decide to do so. Also, the Agreement can be written so that shares cannot be sold or transferred without your approval. Because there is no market for these shares, their value is highly discounted. (What would someone pay for minority shares in assets over which they would have no control?) So you are able to transfer these assets to your children, removing them from your taxable estate, at a discounted value - all without losing control. If you gift shares in increments of $10,000, there is no gift tax. (Larger gifts can be applied to your federal estate tax exemption.) And since you are making gifts based on current value - not the appreciated value when you die - this lets you, in effect, freeze the value of your estate at the time the gifts are made. A Family Limited Partnership gives you more control than a corporation. In a corporation, even minority stockholders (either your children or their creditors) can have substantial voting rights and can force sales, distributions or even liquidations. You also have some protection from your children's creditors. If a creditor is awarded a limited partnership interest, the creditor has no more rights than the previous limited partner. • Visit our Acclaimed Estate Planning Education
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