Recent cases have not elimianted the usefulness of family limited partnerships (FLPs) or their "cousins" limited liability companies (LLCs). Most importantly, FLPs and LLCs have been used and are used for a host of real business purposes separate and apart from any estate or gift tax discount benefits. In fact, no one should set up an FLP or LLC just for discounts, you need other valid purposes, or the discounts won't be realized. There are a host of lessons to learn from recent cases, far to complex and long for a quick Q&A, but here's a few pointers. Watch form and details. Taxpayers need to meet with their advisers regularly to monitor performance (though very few if any heed that sage advice). Have a CPA keep the books, etc. Run it like a business (or the way many cases conclude, better than a business!). If you want exclusion from say a parent/donor's estate be sure to limit their control over distributions and liquidation. Better yet, convince them to give up any general partner/manager position.

As for a house, generally (almost always) a house should not be held in an FLP/LLC structure as its a personal use not investment/business asset and it will undermine the entire structure for tax and liability protection purposes. The one exception might be that partnerships (GPs, FLPs) and LLCs occassionally make more sense then trusts to own say a family farm or vacation home. But in such cases the entity is really be used as a property holding device, not to maximize any tax benefits. Also, if a personal residence is held in an FLP or LLC you'll jeapardize home sale exclusions and other income tax benefits.

This is complex stuff, see an estate planning specialist who has dealt with it frequently. Also, if you subscribe to the e-newsletter available on this site you'll see some articles and updates on this. You can also search the archives for past data.