Case Study: Tax Efficient Solution for Ownership Transition
A partnership redeemed out two of its members in a friendly deal to shift ownership to the remaining member. DGC noted that this would have resulted in the termination of the partnership, and would create significant tax implications not to mention complexity in recreating the partnership. DGC also noted that the remaining member, a DGC client, had not incorporated his ownership in his existing estate plan due to the other members. As a result, this was an excellent time to further his existing estate plan for the benefit of himself and his children. This situation highlighted the need for an estate plan, which we always advise.
DGC worked with the remaining member’s attorney to establish a family limited partnership that included a children’s trust. Our client transferred some of his ownership in the original partnership to the Family partnership. This resulted in the original entity remaining as a partnership. In addition, our client shifted value away from his estate to the family limited partnership and ultimately to his children via the trust.
DGC preserved the partnership status of the original partnership to maintain the economic and tax flexibility inherent in partnerships, and provided a tax efficient solution for the member to reduce his future estate.