In many cases, you can transfer more than the $5 million ($10 million per couple) to family members without using up your estate and gift tax credit. This is possible by transferring a greater ownership percentage to your limited partners.
Consider the following example: A gift of $5 million in limited partnership interests is worth less than $5 million in general partnership interests. This is because limited partner shares do not come with any decision-making powers and the ability to sell or transfer these interests is generally restricted based upon the terms of the partnership agreement. In other words, there is no "market" for limited partner shares. This means you can appraise them at a lower value. The practice of appraisal reduction is often referred to as "discounting" the value of limited partnership units. Be careful not too discount too heavily, which could raise red flags at the IRS and potentially invalidate your FLP.