Any tax benefits are a bonus for many of you. As I said, FLPs offer significant non-tax benefits, and those are good reasons to give FLPs a close look. But that’s no reason to be complacent about estate planning. I suspect the folks in Washington will work out some sort of deal in a lame duck session and the exemption won’t shrink, at least not by much. (See our January 2012 issue for details.) FLPs offer a great way to reduce the size of your estate while retaining significant control. Many financial and estate advisors recommend people remove a lot of assets from their estates in 2012 because of the potential for the exemption to shrink. That means the lifetime estate and gift tax exemption would shrink to $1 million per person.
But if Congress doesn’t act by December 31, the estate and gift tax will revert to its 2001 version. For 2012, everyone has a lifetime estate and gift tax exemption of $5.12 million.
You know the story about the estate and gift tax. Another reason to take a fresh look at FLPs is that court decisions in recent years established some clear guidelines and rebuffed the IRS’s efforts to render all FLPs invalid. FLP also offer substantial non-tax benefits. This is an especially good time to consider an FLP because of the potential tax changes scheduled at the start of 2013. Family limited partnerships deserve fresh consideration for inclusion in many Estate Planning strategies that don’t already have them.
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