March 12, 2009

On January 9, 2009, federal legislation (HR 436) was proposed that, if enacted, would eliminate valuation discounts relating to transfers of closely held business interests to the extent of the entity's non-business assets. This legislation especially affects estate planning with regard to family limited partnerships holding cash, bonds, marketable securities and/or real estate (with an exception for real estate activities where more than 750 hours of services are rendered during a taxable year).

The proposed legislation would only be effective for transfers made after the date of its enactment.

While there are many reasons for creating closely held entities and transferring interests to family members, individuals who are contemplating estate planning with family limited partnerships—particularly gifting or sales to Grantor Trusts—should consider promptly implementing their plans. Otherwise, if the proposed legislation is enacted, the tax savings benefits of such planning will be lost.

For more information on the potential impact that HR 436 may have on your particular situation, contact the author or your Much Shelist attorney.

This article contains material of general interest and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. Under applicable rules of professional conduct, this content may be regarded as attorney advertising.