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| FAMILY LIMITED PARTNERSHIP For families who own substantial investment real estate holdings, the family limited partnership is an excellent estate planning device. Used properly in a highly taxable estate, this instrument can save the family many thousands of dollars in gift and estate taxes. In a limited partnership, there are two kinds of partners, general and limited. The general partner or partners have all the management responsibility of the business. By definition, a limited partner cannot participate in the management of the business. Limited partners, while not having the benefit of management, do have a wonderful benefit. They are responsible for the debts and losses of the partnership only to the extent of their limited partnership interest. So, if they have $10,000 invested, that is all they could lose. To save gift and estate taxes, the parents will create the partnership and transfer some asset, perhaps a tract of land, into it. Then the parents will be both general and limited partners at the beginning. Let's say that the land is worth $1 million, and for this example, say that it is not increasing in value. After creating the partnership, the parents begin an annual gifting program to each of the children. While the parents will want to keep the general partner shares in order to retain control, they can give the limited partner shares away and lose no control. With each of 100 partnership shares being worth $10,000, the parents can use their annual exclusion from taxation and give one percent per year to each child from each parent. This procedure passes "white money," i.e. partnership shares out of the parent's taxable estate ... and places them in the children's (or grandchildren's) taxable estate. The theory behind this approach is that it delays the taxation on the asset for a generation (or two generations). With each generation being about 25 years younger than the previous one, this strategy delays tax by 25 years for each generation to whom gifts are given. You may include our cause in your limited partnership by giving shares to us. Just tell your attorney or accountant to also include "The Foundation" as one of the annual gift recipients. This approach expedites the removal of assets from your taxable estate. |
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