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| Risk & Reward |
The Collector's Conundrum
Mary Lowengard
05/03/2004
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Moving the property into a Family
Limited Partnership (FLP) also lowers the tax consequences of a lifetime
transfer of collectibles, says Jon Gallo, a senior partner with the Los Angeles-based firm Greenberg Glusker Fields Claman Machtinger &
Kinsella. In an FLP, general partners control the trust, and limited partners
share profits but not control. Thus, a couple may own a 1 percent interest as
general partners and 99 percent as limited partners. Then they transfer the
collection to the partnership. The FLP interest is an asset that can then be
given to a dynasty trust, since under current gift tax law, valuation discounts
are allowed. The end result: leveraging the gift tax lifetime exemption.
However, one must stringently follow the rules. “One must look at the FLP assets
as owned by a business that is owned by the family,” explains CPA Lipoff. “The
head of the family has a fiduciary responsibility to the other family members to
protect their assets.”
Jon Gallo offers this final advice: “Estate taxation
is an elaborate chess game with the IRS, and if you play by the rules, you will
always win in the end. The IRS simply expects you to obey the laws.” Photo courtesy of Marilyn G. Karmason, M.D., Majolica International
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