Q: I recently became the trustee of my father's estate. He is 86 and dealing with dementia. His estate is now valued at $20 million, and in a couple of months there'll be a possible increase of another $14 million.

I am being advised to create a Family Limited Partnership. Could you give me the pros and cons? The majority of the money is in a Treasury Money Market and the rest in a small portfolio that is very conservative.

DH, Miami

A: Through proper use, a Family Limited Partnership may be able to be used to reduce the value of your father's estate for estate tax purposes. Once the FLP is drawn up and funded, units of the limited partnership can be gifted to family members at a discount. Some of the value may be discounted at death. It's sophisticated estate planning, and although the costs can be quite high, the tax savings on large estates can be dramatic.

However, my friend, FLPs have been used and abused and can be challenged by the IRS as pure tax avoidance vehicles if there's no other reason for the entity to exist except estate tax minimization.

If it's viewed by the IRS as a deathbed transfer, the discounts may be jeopardized, thereby negating the time, expense and effort of setting the FLP up in the first place.

It's important to weigh the risks with the rewards, as always.

This is a matter for a good attorney who specializes in estate planning. Perhaps a second opinion may be in order, just to feel secure.

I wouldn't be too aggressive, as it will land on your lap as trustee if things don't go well. Check out what your powers are as trustee.

Although not a requirement, I would talk to your siblings and other heirs, explaining your father's tax liability and perhaps also explore some charitable options to negate some estate taxes.

You've got a big job on your hands.

Good luck to you.

Meg Green is a certified financial planner. Mail questions to her c/o Sunday Business, The Miami Herald, 1 Herald Plaza, Miami, FL 33132 or send an e-mail to

askmeg@MiamiHerald.com. Include your full name and city of residence.

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