Some people are under the impression that establishing a family limited partnership can somehow eliminate allย estateย taxes, regardless of the fact that theย estateย or the overall structure of the business.ย ย 
The concept behind this is that the parents can transfer property into a partnership business entity with children and potentially grandchildren.ย ย These individuals will share ownership as limited partners.ย ย The parents hope that this partnership will then be used to transfer assets to a younger generation tax-free.
However, in order for a family limited partnership to be effective, the IRS has to be effectively convinced that the limited partnership has a purpose beyond reducingย estate taxes.
Renaming your stock investments or a home as a family business doesn’t make them one.ย ย However, if you do have a real and established business, there can be significantย estateย tax advantages to creating a family limited partnership, and this should only be done under the guidance of anย estateย planning attorney.
A family limited partnership is only operational and helpful when you have an attorney who knows how to set this up properly. A lawyer can help you explain what it means to set up this partnership and whatโs required in order to maintain it.
Creating a limited partnership for you real business can allow you to transfer minority interest to future inheritors.ย ย The pros and cons of this approach are something you should discuss directly with a lawyer who is very familiar with all aspects ofย estateย planning.ย ย
