Certified Public Accountants
...Freeing clients to pursue their passions since 1981

Is it Time to Make Those Gifts to Family Members?

For decades, one of the most popular and effective methods to transfer family wealth to younger generations was through Family Limited Partnerships (FLP).

Estate PlanningParents would set up an FLP and contribute assets, such as real property, to the FLP. They would then make gifts of minority interests in the Limited Partnership to their children and grandchildren. Since a minority interest is worth less than the same proportion of the FLP‚ an asset value and a discount is applied to the value of the minority interests transferred. In the past, these discounts could range from 15% to 40%, depending on the type of assets in the FLP and the minority interests transferred. These discounts would be determined by a qualified appraiser.

Since earlier this year, the Department of the Treasury has been working on a new proposal that would regulate the amount of discounts that could be taken in valuing gifts to family members. The extent of the limitation is unknown at this time; the regulations could significantly limit or even eliminate discounts for gifts to family members. What’s more, we do not yet know when these new regulations are expected take effect.

In light of this, if you have any interest in making gifts as part of your overall estate plan, we advise that you meet with your estate planning attorney sooner rather than later. You may not want to wait until the new regulations take effect to make any gifts that involve the application of discounts. Of course, we would be more than happy to assist you and your attorney with the planning of these transactions.

Contact the experts at Sobul, Primes & Schenkel office, located at 12100 Wilshire Blvd., Suite 1150, Los Angeles, CA 90025 to answer your estate planning questions.  We can be reached by phone at (310) 826-2060 or email.

Leave a Reply

Your email address will not be published. Required fields are marked *