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‚ÄčAdvanced Planning with Family Business Entities

Our client was a widow who inherited interests in several closely held family businesses, which had been valued in the spouse's estate at a substantial discount. She also owned interests in some of these same entities and subsequent to the receipt of a closing letter for the husband's estate, the widow gifted a portion of her interests to her children, taking a minority discount. She then sold the remaining interests she had received from her husband to her children at the appraised fair market value—all interests being valued as minority interests—and the family subsequently realized substantial value when certain entity assets were sold years later at premium values (in excess of $10 million). They created a family limited partnership in which she transferred her remaining interests and which served to streamline the management and administration of the various business entities as well as address other property management and creditor protection concerns. When our client passed, she owned a non-marketable minority interest in the partnership, which was included in her estate and valued accordingly. Her estate was audited, and the net result was millions of dollars passed to the next generation at a much lower cost due to the valuations accepted by owning the interests in a partnership.