Gifts of Family Limited Partnership Stock: Policies and Procedures
If some or all of the stock can be contributed to the Foundation before the sale of the corporation is completed, more financial resources can be made available for charitable purposes at the lowest after-tax cost to the donor.
Donors may seek to contribute FLP shares to the Foundation even if the shares are not to be redeemed immediately. In such instances, the Foundation will not guarantee or pre-arrange the sale of the shares or make any other agreement that might imply or cause a material restriction to be imposed upon the contribution.
As a general rule, gifts of securities are sold as soon as possible. The Named Fund established by the donor is then credited with the proceeds from the sale, net of commissions or expenses.
In the case of shares that are not readily marketable at the time of the gift, it should reasonably appear that the stock might be sold or converted into income-producing property within a specific time frame, not to exceed two to three years. In such instances, the Foundation may request that the donor contribute a minimum of $10,000 and execute an Assignment Agreement. The funds will be used to obtain an independent review of the FLP and to pay fees incurred while holding the shares in the FLP including the Foundation’s administrative fees.
Responsibilities of the Donor
The donor shall be responsible for obtaining his own qualified appraisal for the purposes of establishing the value of the gift for federal income tax purposes, including the preparation of Form 8283 for Noncash Charitable Contributions.
It is the donor's responsibility to prepare the appropriate instruments that may be necessary to transfer the stock to the Foundation.
The Foundation’s legal counsel shall review proposed transfer instruments as well as the Family Limited Partnership and any shareholder, buy-sell or other agreements that impose any restrictions or limitations upon the sale or transfer of the stock.
Procedure for Accepting Shares in FLPs
Prior to or upon transfer of the stock to the Foundation, the donor and the Foundation will sign an agreement stating the terms of the gift, which shall specify that there are no restrictions on the Foundation's right to use or convey the property.
A fair market value (price per share) of the FLP will be established at the time of sale. No warranty is given by the Foundation that the valuation will be acceptable to the IRS. The Foundation may obtain an independent appraisal of the value of the stock prior to agreeing to a proposed sale of the stock.
The donor will be advised that if the property listed on IRS Form 8283 is sold, liquidated, or otherwise disposed of within two years of receipt, the Foundation is required to file a separate report within 125 days on IRS Form 8282 ("Donee Information Return") and disclose facts about the disposition. See Treas. Reg. 1.6050L-1.
What the Foundation Will Not Do
The Foundation will not pay for legal counsel, appraisals or other services for the donor.
The Foundation will not establish or corroborate the value of property for the purpose of substantiating the donor's income tax charitable deduction.
In many cases, upon the subsequent sale of FLP shares, there will be a stock purchase agreement setting forth the proposed terms and conditions of sale. The Foundation cannot join in or participate in the issuance of warranties and representations or in indemnification agreements.