Utilizing Freeze Partnerships to Minimize Estate Tax: Meeting Section 2701 Requirements

Preferred partnership freezes are becoming a more frequently used estate tax vehicle. These freezes allow taxpayers to transfer future appreciation of assets to younger family members, thereby avoiding estate taxation or limiting the use of the unified credit. Holding a preferred interest entitles the transferee to a preferred return on the capital contribution and in liquidation. Younger family members can purchase common interests with cash by way of gifts.

Although freeze partnerships can push down substantial appreciation of assets, properly structuring the partnership and meeting Section 2701 requirements is crucial. For example, preferred investors must receive a preferred return and the return must be payable at least annually. Not meeting Section 2701 requirements can result in a zero valuation of the preferred interest, negating the benefits of the partnership freeze. Estate planning professionals need to understand the stipulations of establishing a freeze partnership.

Listen as our panel of succession planning veterans discusses simplifying structuring and maintaining preferred partnership freezes for trust and estate advisers.

1. Preferred partnership freezes
2. Estate tax benefits
3. Ideal situations for partnership freezes
4. Meeting Section 2701 requirements
5. The mechanics
6. Caveats
7. Examples
8. Other considerations

The panel will cover these and other critical issues:

1. How preferred partnership freezes mitigate estate tax
2. Identifying ideal assets and estates for freeze partnerships
3. Meeting IRC Section 2701 requirements
4. Caveats to avoid when structuring and maintaining freeze partnerships

Learning Objectives

After completing this course, you will be able to:

• Identify estates that are ideal candidates for a freeze partnership
• Determine the requirements of Section 2701 that must be met
• Decide which assets are best candidates for freeze partnerships
• Ascertain how inadequate payments to the transferee can jeopardize preferred partnership freezes

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of estate, gift and trust taxation including various trusts types, the unified credit, and portability.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).