LLCs versus FLPS?

LLCs versus FLPS?

How do I compare limited liability companies and family limited partnerships to decide which to use?


Clearly you should have a real estate attorney involved to be certain that title is properly transferred. This may require no more than a deed being signed by you giving your one-half interest to your mother. For example, if the deed indicates the house is presently owned by "Sam Son and Mary Mother, as joint tenants with right of survivorship", the deed might simply be signed by both of your transferring title to "Mary Mother". But be careful, there could be a host of twists and turns that you may have to address. For example, if your mother is getting on in years, or her health is failing, the worse thing that you might do from an elder law planning prospective is to put the home back solely in her name. In fact, a very common technique by many senior citizens is to deed their homes to their children and reserve a life estate, the right to live in the home for life, for themselves. In other situations parents simply give their homes to the children, but in some circumstances they retain the home as a protected asset. This depends on the size of her estate, the laws in your state, her medical and long term care coverage, and a host of other facts and circumstances. You have indicated nothing about the size of your mother's estate. If her estate could exceed the $650,000 Federal estate tax exemption (1999) transferring her home back to her could exacerbate her estate tax problem. You have indicated nothing as to the reason for the gift transfer to your mother. Is it in fact a gift by you to her? If so, the value of your half interest in the duplex exceeds $10,000, you will have made a gift that will use up a part of your $650,000 (1999) applicable credit amount or even trigger a gift tax if you have already made other taxable gifts. You have indicated nothing about whether or not the property is used as a personal residence or as a rental. This will have a significant impact on the tax result. If it is a rental property and you are selling it, you will not qualify for the home sale exclusion. If it is your personal residence, i.e., your half of the duplex, then you may qualify to exclude up to $250,000 ($500,000 if you are married and filing a joint return) of any gain. All in all, it sounds like a very simple transaction at first blush, but you have estate tax, income tax, elder law, and real estate issues all of which should be addressed. Your best bet is to discuss these with an experienced real estate attorney first and then determine if further planning is necessary. You should also check with your accountant concerning some of the income tax consequences. A consultation with an elder law specialist (not just an estate planner) may be quite important. Remember this reply is a generic reply and should not be used without first seeking the advice of an attorney in your state.

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