Step 1:

Create an FLP and an LLC.
– Register each entity’s Articles of Incorporation with the state. – Draft operating agreements for both entities. – Declare the LLC as the general partner of the FLP.

Step 2:

Transfer assets to the FLP (valued at $3,000,000).

Step 3:

Initially, the client receives a 100% interest in the FLP and the LLC.
-The LLC serves as the FLP’s general partner with a 1% interest in the FLP. The client owns a 99% interest in the FLP as a limited partner. -The client owns a 100% interest in the LLC.

Step 4:

Client gives a 10% interest in the LP to his children.
– After appraising the 10% interest in the LP, a valuation discount may be applied, if appropriate, to determine the value of the gift. For example, if 10% of the FLP’s assets are worth $300,000 (10% of the total value of $3,000,000), and a 30% discount is applied, then the value of the gift for gift tax purposes is only $210,000