Why not use a co-ownership of fractional interests (a tenancy-in-common) instead?
Instead of a family partnership, you could hold assets with your children as co-owners as what is called “tenants-in-common.” As tenants-in-common, you would each literally own an undivided piece of the asset. In some situations, the tenancy-in-common may more easily avoid a “change in ownership” under Proposition 13 with its increase in property taxes.
However, most times the family partnership may be structured to avoid such an increase.
A tenancy-in-common generally is not as desirable as a family partnership because the IRS contends the “minority” and “lack of marketability” discounts are not as large in a tenancy-in-common. In addition, the deeds involved in annual gifting are burdensome. Also, you cannot control the entire asset; all the co-owners have to agree to do anything. In addition, the co-tenancy provides no creditor protection. However, we have had a number of families choose to go this way.
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