Clients frequently know they will face estate taxes at death and ask Bordeaux Wealth Advisors for ideas and strategies to lessen that cost to their children.  However, they are also not ready to transition their wealth and relinquish control over it particularly if the value is significant. Perhaps they want to maintain financial control, or they feel their children are not ready for the responsibility of managing wealth.

In these cases, Family Limited Partnerships (FLPs) could be an effective method of maintaining financial control, while transferring wealth out of their estate in a tax-efficient manner. Curious how these structures can work for you? Click here to learn more.

FLPs are essentially holding companies owned by two or more individuals that have two classes of owners – general partners (typically the parents) and limited partners (typically the children). In most situations, one will donate assets (family business ownership, illiquid assets, publicly traded securities, cash, etc.) to an FLP in exchange for both general partner and limited partner interests, and either immediately or over time, gift those limited partner interests to their children or even grandchildren. Due to the lack of control and marketability that limited partners are subject to, a further opportunity arises to potentially transfer these interests to future generations at a substantial discount compared to the assets’ actual fair market value (typical discounts can range from 15-40%). In addition, the value of the gifted assets is determined at the time the partnership interests were transferred; thus, any future appreciation on the gifted assets is no longer in one’s estate at death.

FLPs help individuals alleviate some of the common stresses experienced by individuals that are looking to transfer their wealth to future generations. While FLPs are an extremely valuable tool, they can be quite complex to set up and administer which is why it is essential to work with experienced financial advisors who understand the complexities of estate and wealth transfer planning. At Bordeaux Wealth Advisors, we prioritize having a strong relationship and deep understanding of our clients’ financial situation and their long-term objectives. In coordination with our clients’ estate attorneys, we will model and illustrate various wealth transfer solutions that could be appropriate for your family’s situation both financially and personally. To read more about how we helped a client with an FLP, check out this BWA case study.


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