Estate Planning — Tutorial 8 Essay Example
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Estate Planning – Tutorial 8
Partnerships can be either limited or general. Thorton and Gregory 345).David and his colleagues are in a business partnership. This is a type of business formed between two or more individuals (
An incorporated limited business is a kind of limited partnership, mostly employed by businesses that engage in high-risk projects. In the situation of David, he should engage in a family limited partnership. In this type of partnership, family members of one partner will accrue joint ownership of assets that are family-owned (Renkemeyer 587). Therefore, David can transfer a part of his share of the business assets to other family members. This partnership is important in making transfers upon the demise of a partner and lays the platform for obtaining a potential discount on the transfer values. The limited partnership offers a protection measure from the partnership’s creditors as well as the individual members.
In this partnership structure, David will be able to transfer assets from his business including real estate, stocks, bonds and other collectibles to his family members through gifting equity in partnership every year and this may trickle to the limits of gift taxes. Given that David is married, the partnership will offer room for favourable treatment from taxes relating to transferring of the business assets, associated with the lack of marketability and the lack of control of the interests of the limited partnership. Taxes are usually compensated on the asset value of fair markets that are given or bought (Thorton and Gregory 346). The Fair Market Value represents the value that is usually paid in order to obtain an asset. It usually happens between a conjectural willing seller and a hypothetical willing buyer, both seeking to protect their interests and with enough information of the significant facts under the partnership (Renkemeyer 589).
In the Family Limited Partnership, David, his wife, and children have limited partnership interests. Thus, the other members are the general partners and with the control and management of the partnership. The general partners resolve and implement all the decisions of the partnership. For the given case, the other members can choose whether to obtain or sell the assets in the partnership. They can also decide on the investments, which should be made by the partnership, and whether to distribute profits from their partnership (Thorton and Gregory 347). Additionally, the general partners may opt to dissolve the Family Limited Partnership. Therefore, this means that the operation of the partnership occurs at the discretion of the general partners control the operation of the partnership, in their absolute discretion. Nevertheless, they general partners do not own the FLP’s assets (Renkemeyer 589).
There are several pitfalls associated with giving information regarding probate matters and financial issues. This is evident regardless of immense general information on estate planning and tax information currently available. The pitfalls are that most advice will not provide tax or legal advice that is guaranteed as being timely, accurate, or complete (Maurer 817). Furthermore, laws regarding probate matters and financial issues are largely state-particular and may not be applicable in certain regions or in particular situations. Furthermore, state or federal laws are subject to change and are usually complex in nature (Maurer 818). Changes made in such legislations and regulations are likely to impact on pre‐tax or after‐tax results on investments. Thus, advice offers no warranties regarding information on financial issues and probate matters.
In conclusion, only tax professionals or attorneys should be consulted regarding specific tax or legal situation.
Maurer, Richard S. «Ethical and Legal Problems of the Corporate Counsel in the Rendering of Personal Advice to Company Officers and Employees.» The Business Lawyer (1966): 817-828.
Renkemeyer, Troy. «Family Limited Partnership: An Effective Estate Planning Tool, The.» Umkc L. Rev. 64 (1995): 587-590.
Thorton, D. John, and Gregory A. Byron. «Valuation of Family Limited Partnership Interests.» Idaho L. Rev. 32 (1995): 345-348.
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