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Family Limited Partnerships
The Tax Court has held that property transferred to a family limited partnership is includable in an individual's estate where the individual retains the enjoyment of property transferred. In this case the taxpayer controlled and managed the partnership assets in the same manner both before and after the transfer to the family limited partnership, continued to be the only person with the authority to sign for the partnership, and continued to live at his residence rent free even after he transferred it to the partnership. The Tax Court found that the taxpayer and the limited partners (his children) had an implied agreement to allow the taxpayer to continue to possess and enjoy the property and retain the right to income from the assets during his lifetime.
Recommendation: This case emphasizes the importance of treating the partnership as separate from any of the partners. Simply put, if the partners ignor the partnership, so will the IRS. If partnership formalities are observed, this decision should not be an impediment to the use of family limited partnerships in estate planning. SBW
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Sponsored by James J. Eccleston, an attorney representing stockbrokers, financial planners and
investors nationwide in arbitration, litigation and regulatory matters, and a shareholder with the law firm
Shaheen, Novoselsky, Staat, Filipowski & Eccleston
P.C.(www.snsfe-law.com). This Web site contains material
of general interest. It is neither intended to, nor constitutes, either legal advice or investment advice.
Always consult an attorney and/or investment advisor when building and protecting your wealth.
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