For the vast majority of people in this country, the issue of tax ramifications associated with gifting assets to their heirs is not of great concern; however, for the wealthiest people in the US, proper tax planning in the gifting process can represent an opportunity for tremendous tax savings.
For years, business valuation specialists have worked with estate planning attorneys to determine the discounted value of assets being gifted as part of a family limited partnership (FLP); the discounts inherent in the valuation of these FLPs typically means significant tax savings for individuals who are in the position of gifting interests in an FLP to their heirs.
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).
We have recently received word from the Treasury Department that those changes that were being discussed are no longer going to be implemented; this means that for the people who are gifting assets to their heirs that are above the gift exemption threshold ($5.5 million for individuals, $11 million for married couples), FLPs remain one of the most important tools to be used as part of an overall tax planning strategy.
The short video below discusses this in some detail, and also provides an example of how an FLP can assist in mitigating the effect of the current tax laws that apply in gifting situations. Please feel free to contact me with any questions- this can make a big difference in your estate planning process.