In previous newsletters, we have discussed the benefits associated with family limited partnerships (see Planning to Pass the Baton: Family Wealth Transfers, September 2011). The recent case of Estate of Kelly (March 2012) offers another example of how family limited partnerships can be used in business and estate planning.
In Estate of Kelly, Mrs. Kelly was an elderly widow who had succeeded to sole ownership of her family’s substantial business and investment holdings. Mrs. Kelly’s health was deteriorating and she lacked experience in business and investment matters. With her children willing and able to assist her, Mrs. Kelly formed four limited partnerships and transferred to those partnerships specific properties and investments. Mrs. Kelly also formed a wholly-owned corporation to act as the general partner of each limited partnership, and her children acted as the corporation’s officers and directors. In this capacity, the children and grandchildren actively managed the limited partnerships’ business and investment interests. Over a number of years, Mrs. Kelly gifted limited partner interests to her children and grandchildren. At the time of her death, Mrs. Kelly had gifted all or a majority of her limited partner interests in three of the four limited partnerships.
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