Family Partnership

Will I still a receive a step-up in basis on my death?

Yes, you will still achieve a step-up in basis at your death. However, because at your death you own shares in the limited partnership, not real estate, it is the shares in the partnership that receive a step-up in basis. If, as a result of creating the limited partnership, a discount has been achieved, then your step-up basis will reflect the discounted value.

For example, a piece of real estate valued at $1,000,000 is conveyed to a family limited partnership. Thereafter, a forty percent discount is established for the value of the family limited partnership containing the real estate. The total value of the family limited partnership at the date of death is $600,000. This represents the new basis value of the limited partnership shares you own at death. If you and your spouse own your shares as community property, both your half interest and your spouse’s half interest in each of the shares achieves a new basis, equal to the discounted value at the date of death.