• Delay Entity Formation And Gifts: If FLP interests are to be gifted to family members, wait a reasonable period of time between the creation and funding of the FLP and the gift of the FLP interests to the donor’s family members. This delay will avoid the IRS from claiming that the underlying FLP assets were the subject of the gift.
• Relinquish (A Little) Control: If the donor of the FLP interest holds only limited partnership interest, avoid having the donor’s agent under the donor’s durable power of attorney also serve as the general partner of the FLP. The IRS will claim that the donor’s agent will be able to control distributions from, or liquidation of, the FLP.
George F. Bearup is a senior trust advisor for Greenleaf Trust, an $8 billion Michigan-headquartered wealth management firm with disciplines in asset management, trust administration and retirement plan services. A graduate of Northwestern University School of Law, George has over 45 years of practical experience as an estate planning attorney. He is a Fellow of the American College of Trust and Estate Counsel.