Boulder Estate Planning Legal Blog
The COVID-19 pandemic has drastically affected almost every aspect of Colorado residents’ lives. The economy has been especially affected. Many individuals have lost their jobs, and others stay in and work from home, not spending the money they typically would on food, entertainment, and travel. While the pandemic is an alarming public health situation that should be taken seriously, and hopefully is resolved soon, there may be an opportunity for some individuals to use the current economic situation to their advantage—to turn lemons into lemonade. The Preferred Partnership Freeze is a Colorado estate planning tool that may allow well-off individuals to take advantage of the current economy and low values and plan for future wealth accumulation.
What is a The Preferred Partnership Freeze?
The Preferred Partnership Freeze utilizes the preferred partnership structure to “freeze” assets that can be expected to appreciate in the long run at today’s lower valuations, while also shifting the expected appreciation into the future and future generations, so estate taxes can be avoided for generations. Typically, the older generation will contribute assets expected to appreciate over time – such as real estate with mortgages, or closely held businesses—into a Preferred Partnership, which has both “preferred” limited partnership shares and “common” limited partnership shares. The preferred shares are held on to by the older generation, while the common shares are gifted or sold to a dynasty trust, typically controlled by the younger generation in the family. Giving away or selling the common shares in this way “freezes” the current value of the assets, and the preferred class receives a specific and fixed rate of return on them. Any additional return above that fixed rate is given to the common class, and taxes on the assets can be pushed off for centuries.
If the above description of Preferred Partnership Freezes sounds complicated, that’s because it is, particularly for those unfamiliar with the laws governing estate planning and taxes. Due to the complicated nature of these transactions and decisions, as well as the high stakes for getting it wrong, Colorado residents who are interested in utilizing a Preferred Partnership Freeze are advised to reach out to an experienced estate planning attorney, to ensure that the process runs smoothly, legally, and to their maximum financial advantage.
Are You Looking for a Colorado Estate Planning Attorney?
If you have questions about your estate plan in the aftermath of COVID-19, or if you want to take advantage of the opportunity to set up a Preferred Partnership Freeze, you should contact the Boulder estate planning attorneys at Braverman Law Group. Our attorneys are well-versed in the legal doctrines surrounding taxes and estate planning, and will work with you individually to create a plan that is best for you and your family based on your priorities and net worth. Our attorneys pride themselves on providing excellent client representation and having the ability to clearly explain complex legal issues so that you are certain about what is happening. To learn more, call us today at 303-800-1588.
