0ne of the more important appellate court valuation cases was handed down in late spring by the Eighth Circuit, T.H. Holman. In this month's column, we analyze the reasoning and how it applies to the structuring of family Iimited partnerships.
A family limited partnership (FLP) and a family limited liability company (FLLC) are two entity choices frequently used by estate planners to achieve federal estate tax (“estate tax”) savings. While many considerations impact the choice of a FLP versus a FLLC,5 one factor that probably escapes consideration by many practitioners is the impact of the passive activity loss (PAL) rules for Federal income tax (“income tax”) purposes on that choice.
One of the least discussed and reasoned decisions in entity planning for discount purposes is whether to use a limited liability company (LLC) format or that of the family limited partnership (FLP). On the surface, as an LLC is taxed as a partnership under the Internal Revenue Code,1 practitioners often conclude that there should be no difference.
This month, the column discusses the estate tax strategies for which the grantor trust planning should be considered, including lifetime use of the applicable credit amount, the qualified personal residence trust (QPRT), postmortem use of grantor trusts in the credit shelter trust context, grantor retained annuity trusts (GRATs), and sales to a grantor trust.
Many clients believe that the greatest enemy to their wealth is the federal estate tax. The reality is that very few estates actually pay a federal estate tax and current estimates are that fewer than 20,000 estates annually will actually pay the federal estate tax.
One of the most popular passthrough entities used by sophisticated estate planners is the irrevocable grantor trust, set up during the grantor’s lifetime. The importance of the grantor trust for estate planning purposes has been highlighted by the recent revenue ruling, 2008-22.
Boilerplate provisions are not created equally. Though typically disregarded by your clients as insignificant, these provisions are a key to having excellent documents. Focus is on the most important standard provisions, those that will elevate your documents to the A+ category. Also identified, are out of the ordinary recommendations regarding standard problems, and references to solutions echoed by the Uniform Trust Code.