There are a number of incredibly powerful estate planning tools available to leverage intergenerational wealth transfers. Naturally, the appropriateness of a given tool hinges on the assets your family controls. For some, one of those tools worthy of serious consideration is the Family Limited Partnership (FLP).
As a testament to the power of the FLP—and the costs of failing to use them correctly—Peter Reilly at Forbes has assembled the six developments of 2011 which I encourage you to read. When FLPs work, they work. Consider the cases of Natale Giustina and Anne Y. Petter. However, since we so rarely learn our best lessons from our successes, there are four developments to instruct us regarding what not to do: LINTON v. U.S, Axel Adler, Jorgensen v. Comm’r. 107 AFTR 2011,and Paul H. Liljestrand.
The Forbes article gives a “moral of the story” of sorts regarding each case. In the end, as we head into 2012 and ever closer to the unknown tax laws of 2013, the moral of the FLP story is that this may be your last year to fully leverage the wealth transfer power it provides.
Making use of the FLP tool requires dedication to the process and setting it up now (rather than later) may guarantee your ability to make use of the current laws.
Regardless, 2012 may be the year for a mega-gift.