Gifting Family Limited Partnership

A family limited partnership has many gifting benefits. A family limited partnership reduces gift taxes and allows gifting of fractional interests. An example of how a family limited partnership helps with gift taxes is shown below.

Example of gifting using family limited partnership

Suppose a couple transfers $1,000,000 of real estate property asset into a family limited partnership and acquire all of the family limited partnership units.

The couple then make gifts of all the family limited partnership unites to their child, the beneficiary. Since family limited partnership units are illiquid and undesirable on the normal market, the family limited partnership units are discounted by 40%. That means 40% of the family limited partnership assets or $400,000 will not owe transfer taxes.