Last-Gasp Estate Planning: The Formation of Family Limited Liability Entities Shortly Before Death

Abstract

Family limited partnerships have been popular gift and estate tax planning vehicles for many years. In recent years, family limited liability companies (LLCs) have also become common, particularly in those states that have updated their statutes to take the check-the-box regulations into account. LLCs with more than one member are usually classified as partnerships for federal income tax purposes. In a typical structure, when there is adequate planning, the donors form a limited partnership or an LLC (jointly, 'family limited liability entity' or FLLE), to which they contribute assets expected to appreciate in value. This article will focus on such use of FLLEs as found in the Strangi case and offer proposals for reform.

Keywords: family limited partnerships, estate tax planning, LLCs, limited liability companies, family limited liability entity, FLLE, Strangi

JEL Classification: K29, K34, H25, H29