New Discount Restrictions on Family Wealth Transfers


New tax regulations restricting valuation discounts on transfers of family wealth through partnerships, limited liability companies, and other family owned businesses are anticipated to be issued as early as mid-September. Any current planning where valuation discounts are beneficial for estate and gift tax purposes should be completed as soon as possible to avoid being subject to the new regulations.

The IRS has long battled the valuation discounts associated with gifts and sales of wealth held in family limited partnerships (FLPs) and limited liability companies (LLCs) without much success. However, Congress has given the U.S. Department of the Treasury authority to write regulations in this area and they are in the process of doing this now. The new regulations will likely restrict discounts related to interests in FLPs and LLCs. Particularly when these entities hold investments such as marketable securities and not just active businesses. The extent of the restrictive provisions in these regulations and their actual effective date are unknown at this time, so it is best to complete any estate planning in this area now.