Another thing I didn't see in your discussion is the
> valuation discounts typically claimed by FLPs. For example,
> you transfer stocks worth $1,000,0000 to an FLP. You gift
> to your sister 40% of the FLP via a LP interest. Most
> people would believe the gift tax value is $400,000 but the
> proponents of FLPs claim that you get a discount because
> your sister doesn't have control of the FLP and perhaps a
> marketability discount (it is harder to sell a minority
> interest than a majority interest). So they might get it
> appraised for $400,000 less a discount of $100,000 for a net
> gift of $300,000. Thus reducing gift/eventual estate taxes
> by the tax on the $100,000. Plus of course the estate tax
> saved for all the appreciation on the 40% after the gift and
> prior to your death. The appraisals are not cheap and one
> is required every time you make a gift. You also have to
> make sure that the FLP is structured in such a way that it
> is not brought back into your estate and thus negating all
> the gift/estate tax savings.
I was curious when the "discount" would get brought up. My understanding is that it is one of the key parts of the FLP. I have had limited contact with FLPs, so I ask to the group:
- Is it still common to discount the valuation of assets in an FLP because the shares are not readily marketable?
- If so, is there a common discount percentage? I used to hear 66% of true asset value commonly used. I'm definitely not advocating the OP continue down the FLP road (the lack of real estate almost immediately negates suitability), but I've met lawyers that were quick to demonstrate that the discounted gifting benefit easily outweighed the costs of annual appraisals, et cetera...
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