A lawyer I've recently used to write a will and related
documents ran thru some calculations on my estate value
(above the current exemption level) and the taxes which
would be due without other planning. They are astounding,
and will get worse as the Federal Exemption amount is
reduced or eliminated by 2011. I am single, and with only
some minor token cash bequests, my estate should all go to
my sister, also single (neither of us having children).
The lawyer brought up setting up an FLP as a estate tax
saving measure. He warned me that it must be done
carefully, to satisfy the IRS, and that it would take quite
a bit of discussion for me to understand (maybe he meant
"trust") the vehicle, and that if I looked online, I would
find many who say they are terrible. So far, the latter
hasn't happened, but what I have read makes them seem
incredibally complex both in funding and administration. I
see no articles on using an FLP between siblings, just
between parents and children, and there is much emphasis on
ongoing gifting,which I hadn't anticipated doing, and
protecting the liability of people with businesses, which
isn't my situation. Apparently my personal residence should
not fund an Flp, and you shouldn't pay personal expenses
from an FLP. So that implies my checking/savings/money
market account(s) shouldn't either. Since I seem to
remember IRAs shouldn't/can't fund them either, what am I
left with, just my brokerage accounts? And at such time as
I need to take the income or proceeds from security sales in
these accounts, how can I get it from the FLP since its use
would be for personal expenses? I am completely mystified at
how this is supposed to work at this point.

I like this lawyer (unusual since I tend to not like
"suits"<g> ), and think he has a reputable firm and does know
his specialty ( estate law). He said we would need more
meetings before I would understand it, and I didn't feel I
was being pushed to buy something, but guided to something
he genuinely believed would benefit my sister and myself.
Yet, the more I read on the net, the more confused I get and
the more questions I have. I will be addressing them with
him eventually, but I'd be interested in feedback from
anyone who cares to give it. FYI, the lawyer doesn't
think a trust is appropriate for me (one reason is it would
be much more expensive, having high yearly maintenance fees
). He did give me an idea of the initial setup costs, and
the need for an accountant to do an annual tax form for it.
That's about as far into the details as we had time to get.
I'm concerned, among other things, that either this
really is a good estate tax planning idea but will seem so
complicated that I will just give up the idea, or that I
will think I understand it all only to find out later than
there are more complications that I didn't fully absorb.

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