Custodial Account into FLP
By Martin M. Shenkman, CPA, MBA, JD A common
scenario is a parent endeavoring to consolidate various family investment accounts into a single family investment entity, such as a family limited partnership (FLP). Custodial funds belong to the child and some brokerage firms won’t transfer custodial funds into an FLP account that restricts the child’s access to the funds greater than the custodian account. Possible solution: include in the partnership agreement a special withdrawal right that lets the child have a window, say 60-days, after attaining the age of majority to withdraw the economic value of his or her partnership interest without discount or reduction. This is analogous to the withdrawal right given under 2503(c) trusts when the child beneficiary reaches age 21. “Notwithstanding anything herein to the contrary, if any partner is a minor for whom custodial funds were transferred or invested in this Partnership (“Minor Partner”), then upon the minor attaining the age of majority (determined by the laws of the State) such Minor Partner may upon notice given at any time within Sixty (60) days of the date of attaining the age of majority that all of his or her partnership interests attributable to said custodial fund contribution and the growth thereon must be liquidated and the fair value therefore, unreduced by discounts, be distributed to said partner. If this right is not exercised within said period this right shall lapse.”
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