MLPs are an attractive investment for estate planning purposes. Similar to other investments, the tax basis in an MLP will reset (or be "stepped up") to the current market value when the investment is passed on to an heir upon a unitholder's death. The stepped-up value will be included in the descendant’s estate and may be subject to estate tax, based on the current market value of the investment, just like other investments. However, because of the potential for tax deferral on an MLP’s distributions, the distributions received during the deceased unitholder’s life may never be taxed. Do not put MLPs in a charitable remainder trust. Every $$ of income is UBTI and taxed at a high rate.
"Do not put MLPs in a charitable remainder trust. Every $$ of income is UBTI and taxed at a high rate."
Its sa reason not to put MLPs in an IRA either. The statement that every $ of income is UBTI seems a little overreaching. I know that depreciation recapture creates UBTI. Maybe the two are the same?
A charitable remainer trust has completely different rules regarding MLPs and that statement of every $$ being taxable is straight out of the tax code. The difference is you cannot do the offsets and the exemption do not apply in the trust. Lots of things create UBTI and it is impossible to predict. However most midstream MLPs have had negative UBTI numbers and UBTI is not an issue for most MLPs held in small to moderate amounts in an IRA. You can go to Investor Village MLP board and search UBTI for a complete discussion on this.