THE KALEIDOSCOPIC WORLD OF FAMILY LIMITED PARTNERSHIPS: ISSUES TO NOTE EN ROUTE TO THE SUCCESSFULLY PLANNED CALIFORNIA REAL ESTATE FAMILY LIMITED PARTNERSHIP1
By Steven D. Anderson, Esq. and Quynh T. Tran, Esq.*
Many owners of California investment real property have enjoyed tremendous increases in value in recent years. In enacting the Economic Growth and Tax Relief Reconciliation Act of 2001,2 Congress gave some limited relief to high net worth owners of investment real estate, but lasting protection from the Federal transfer tax burden ultimately proved illusive. Consequently, planning for the management and intergenerational transfer of real property continues to be a vital goal for many California families.
For the transfer of primary residences or vacation homes, qualified personal residence trusts are the recommended estate planning tool.3 In the investment real property arena, recent case law developments aside, family limited partnerships ("FLPs") continue to be effective, providing senior generation members with retained control of family investment real property while transferring significantly discounted interests to younger generation members, and imposing restrictions on transfer, certain creditor protections and formal governance and operational structures.4