In an Unusual Tax Year, the Wealthy Turn to Partnerships —NY Times

Wealth Managers: Proceed with Caution When Setting Up an FLP

Once an esoteric way for families to centralize management of assets, the Family Limited Partnership (FLP) is becoming extremely popular this year, writes the New York Times.  Why?  Because of the scheduled expiration of the $5.12 million gift tax exemption at the end of this year.   Still, setting up an FLP doesn’t make sense for all companies. 

A FAMILY limited partnership was once a rather esoteric way for wealthy families to centralize the management of real estate and various pots of money. But this is not a normal tax year.

The arcane device has suddenly become popular because of the scheduled expiration of the $5.12 million gift tax exemption at the end of this year. For years, the exemption for gifts to heirs had been $1 million, and it’s not clear what will happen to the tax break, just one of many tax and spending measures expiring at the end of 2012.