Are you a High net worth individual? This matters…

If you are fortunate enough to be a member of the wealthiest in this country (or know someone who is), the issue of gifting carries more significance for you than it does the rest of the population. This is because it is very possible that your gifts to your heirs, for example, likely constitute a tax-generating activity, above the gift exclusion amount that is allowed by the IRS.

Estate planning attorneys have worked with high net worth clients for the past few decades (in conjunction with valuation experts) to mitigate the effect of these taxable events, through the use of an entity known as the Family Limited Partnership.

There is currently a proposed modification to IRS 2704, the internal revenue code that governs FLPs, that if it becomes law, will greatly restrict the ability of individuals to utilize an FLP to minimize the taxes that are generated in situations where a gift above the exclusion amount is made. (You can read more about the 2704 regulations here).

The proposal is currently in a public comment phase; this phase ends at the end of 2016. This means that it is very likely that, at the end of 2016, the opportunity to utilize the FLP as an effective tax planning tool may be forever lost.

Please watch the videos below, to understand how an FLP might be able to save you a lot in taxes under the right circumstances; and then contact me if you have any questions about how this might apply to you.

Family Limited Partnerships and the IRS:

Family Limited Partnerships- a Brief Example:


One Response to Are you a High net worth individual? This matters…

  1. […] For the last several months, the Treasury Department had contemplated making significant changes to the IRS tax code that governs the valuation of FLPs- changes that would have severely limited the ability of business valuation specialists to apply these discounts, and for the limited partners in an FLP to take advantage of them (I covered this last year here). […]

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