With the recent soaring popularity of family limited partnerships as a vehicle for passing ownership of privately held companies to the next generation with generous tax savings, tax accountants and tax attorneys say that many clients have inquired about the possibility of marrying their individual retirement accounts to the partnerships. Typically, they’ve received an unqualified answer: “no.”
But in an article in the August issue of the magazine Trusts & Estates, Chris Bray and David Kearns, director of estate planning and an analyst for Sterling, the high-net-worth division of National City Bank, respectively, maintain that “it might be that estate planners have been answering their clients’ inquiry too quickly. Maybe there is an opportunity for the family limited partnership and the IRA to work together as an effective estate-planning vehicle.”
By using a family limited partnership as an IRA asset under carefully controlled circumstances, they write, “it might be possible for clients to achieve the best of both worlds for estate and income tax-planning purposes.”
But the authors urge caution “before exploring this new frontier in estate planning,” as they put it. “There are numerous obstacles and controversial issues that surround the successful implementation of such a strategy.”