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The details are still unknown, but family limited partnerships and family limited liability companies are being scrutinized by the IRS and the US Treasury and changes are coming. The IRS is looking to close a loophole that has worked very well for many years for wealthy families.

The IRS is about to get tough on the use of family limited partnerships and family limited liability corporations, used by wealthy families to avoid paying millions in taxes, according to The New York Times in “Navigating Tougher I.R.S. Rules for Family Partnerships“. There are no specific details available at this time, but anyone who is in the process of setting up one of these entities needs to get them completed as soon as possible. There’s no way to know when this will happen, but it’s coming.

The White House estimated in 2012 that closing this loophole could net at least $18 billion in tax revenue over 10 years. Assets in family partnerships, like securities and cash, still have a value that does not support a discount of 30%. Some advisers argue that the partnership, not the individuals, controls when securities are bought and sold and distributions are made. However, tax experts expect that entities set up to hold businesses or assets that require consolidated management, like rental properties, will still see some discount.

If a family has significant real estate, typically they use discounts to transfer interest in the entity. If you’re already setting up a partnership or making gifts to one to accelerate what they were doing, get it in under the deadline. The IRS won’t make the date retroactive, so get going.

Talk to your estate planning attorney about how this change may affect your estate planning.

Reference: The New York Times (August 17, 2015) “Navigating Tougher I.R.S. Rules for Family Partnerships

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.