May 30, 2017

It’s no surprise to anyone who has engaged in the estate planning process already that there are plenty of strategies out there to help you accomplish your planning goals while also passing on as much wealth to the next generation as possible. Many of these tools, though, could still be subject to generation-skipping taxes or other measures Congress has put in place. One novel strategy that could help minimize taxes is by granting a family member partnership interests in a family business.

The most common way to think about estate planning without using this tool involves reducing the values of assets that will be included in an estate in order to pass on the future appreciation to the next generation taking control of that asset. This is usually done with tools like intentionally defective grantor trusts, grantor retained annuity trusts, or qualified personal residence trusts. While all of these certainly have their place, each does come with some disadvantages that could compromise your ability to accomplish estate planning goals.

Partnership income tax law provisions, however, could be the solution you’ve been searching for. A family business already taxed as a partnership, for example, could help accomplish estate planning goals successfully. You can reallocate portions of income and use transfer of appreciation or current value without having to tap into any lifetime or annual exclusions. Even better, this can help you avoid the negative implications of a generation-skipping transfer tax. There are a lot of complex strategies that can help high net worth families, but these should always be evaluated carefully by an experienced estate planning lawyer due to their complexity. All of the details really matter when it comes to strategies like this.

When looking for estate planning solutions, it’s good to have an eye towards strategies that help you accomplish multiple goals at once. The right estate planning lawyer can play a critical role in helping you identify these.