Personal expenses paid by an FLP

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Personal expenses paid by an FLP

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kruspodin

Posted 8/6/2009 10:44:16 AM

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Group: Forum Members
Last Login: 8/7/2009 12:02:53 PM
Posts: 2, Visits: 12

I have a new client who had his estate planning done by an estate attorney who is now deceased. The attorney set up a Nevada FLP for my client and told the client to transfer all of their investments (mostly brokerage accounts) into the FLP. According to my client, the attorney also told them to set up a checking account in the name of the FLP and pay all of their personal expenses from this checking account in the name of the FLP. Thus, all personal expenses (deductible and non-deductible) get paid from this account. Also, the W-2 income from my client's 100 percent owned professional corporation gets deposited directly into the FLP's the same checking account. I understand the validity of transferring the investment accounts into an FLP but I am unclear about the reasoning of paying ongoing personal expenses from the FLP account and depositing regular W-2 earnings into the FLP. I would think that personal expenses and earned income should be handled by a personal bank account rather than an FLP account. I am wondering if my client misunderstood their estate attorney. Does anyone have an opinion about whether personal expenses should be paid from a personal account or if there is a reason to pay them from an FLP account?

Thank you for your help.

Mark Kruspodin, CPA

Post #799

John Jacobson

Posted 8/6/2009 12:14:10 PM

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Group: Forum Members
Last Login: 11/12/2009 10:40:29 AM
Posts: 80, Visits: 119

You will find from reviewing some of the recent cases that doing this is one of the indicia that a judge will look at in determining whether to ignore the FLP for discount purposes. Your client may already suspect that this doesn't make sense, and he\she is right.

John Jacobson

Post #800

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