By Linda B. Hirschson , Barbara T. Kaplan , Diana S.C. Zeydel View or download the Adobe Acrobat version of this Alert here .
Limited partnerships can be an important component of a family s comprehensive wealth transfer plan.
A number of recent Tax Court cases confirm the continuing viability of the family limited partnership as an estate planning tool but highlight the need to observe the form and function of the entity to insure that it accomplishes its purpose, that is, as a mechanism for managing the family wealth and reducing estate and gift taxes. The following summary of these cases is meant to show what families should and should not do to forestall or overcome a challenge to the family limited partnership. In Jones v. Commissioner , the donor owned the surface rights to two cattle ranches. The donor formed two family limited partnerships, one with his son, and one with his four daughters. In each case, the donor transferred a ranch interest to the family limited partnership in exchange solely for a limited partnership interest, and the children contributed property in exchange for general and limited partnership interests.