>>> (and my father's experience bares that out.. his estate was in a
>>>> family trust. What a complicated mess that was.. Glad I
>>>> wasn't the executor). I'm in PA so whatever advanatages CA
>>>> has don't apply to me. (can you shed any light on the
>>>> differences between the states?)
> PMFJI, you might find this site useful:
>
>formatting link
> If memory serves he used to participate in this forum.
>
> I would also like to add that the estate tax savings that
> Stuart referred to can be achieved without a living trust by
> creating a trust through your will after death. However you
> don't get the probate savings using a trust created under
> the will.
>
> 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.
>
> The IRS seems to be on a crusade to curb the discounts as
> there are a lot of cases on this matter. (See for example
> the Strangi case but make sure you read all the appeals,
> remands, etc. Just type "Strangi" into a search engine and
> you will get plenty of hits.)
>
> Another possible advantage of an FLP is it can provide,
> depending on state law, some asset protection. Typically if
> you lose a lawsuit the plaintiff gets your distribution
> rights but not control of the FLP. So the FLP can just not
> make any distributions thus frustrating the plaintiff.
>
> FLPs are not a do it yourself project and they must either
> be monitored annually by a tax professional or you will
> likely end up with a bad result.
Drew,
I haven't been discussing the benefits of the discounting because I'm hung up in the mechanics and complexity of the day to day workings of an FLP and IRS scrutiny. I am not at a point in life where gifting away my assets to my sister on a regular basis makes sense to me. (and I think I could gift her outside of an FLP if I chose to anyway, just not with discounts applied). In addition, my future living requirements are up in the air because of my health, so I'm not ecstatic about launching into a program that could drain down my assets before such time as I really have an idea how much I'll need to live on (comfortably.. very comfortably). Bringing in an apparent need for outside appraisals and legal and accounting advice make its seem even less attractive. And managing my portfolio (th only assets involved, since I think my house should not go into an FLP) as the general partner, with two people's needs in mind, possibly quite different, seems to require more responsibility and know how than I'm up for. So that's the long answer to your question. I'm currently leaning to just shielding my estate from probate costs with a trust. But that's a separate topic. And I would NEVER consider doing any of this without a good lawyer. The question is, have I got one or not. jo.
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