Client Alert Summer 1997 - FAMILY LIMITED PARTNERSHIPS

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Client Alert - Summer 1997

FAMILY LIMITED PARTNERSHIPS

by: Mike Engleman, CPA

The Family Limited Partnership can be an excellent vehicle for transferring value out of your estate while maintaining control over the transfered assets. In addition, the Family Limited Partnership provides for income shifting and asset protection. The following example illustrates the potential benefits:

You own an apartment building and transfer the building to a partnership. You maintain a 10% general partnership interest and transfer 90% to your children or children's trusts without losing control of the property. Making gifts of the limited partnership units is an effective way to reduce your estate and it also transfers the future appreciation of the asset to the children. Another advantage is the shifting of the partnership income to children age 14 and older who are presumably in lower tax bracket. Gifts in excess of $10,000 per donee are subject to the gift tax regulations.

By drafting the partnership agreement to restrict transfers by the limited partners, you provide a device for transferring property to your children without the investment risk of loss due to divorce or the reckless spending of cash.

NOTE: If you would like to discuss the aspects of the Family Limited Partnership in more detail, feel free to call Mike Engleman who has received the AICPA's Certificate of Education Achievement in Tax Planning and Advising for Closely Held Businesses.

NOTE: Business tax deposit deadline extended to December 31 for Small Businesses. The Internal Revenue Service will provide a six-month extension, until December 31, during which small businesses will not have to pay penalties for failing to file their payroll taxes through the Electronic Federal Payroll System. Small businesses generally are defined as companies with fewer than 500 employees. You should have received information on enrolling from the IRS. If you're not set to meet the December 31 deadline, you should contact our office at once.

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