Companies: | 22,702 |
Products and Services: | 740 |
Articles and publications: | 489 |
Tenders & Vacancies: | 0 |
Families usually share a lot with each other. Sharing, though, can be more complex than sharing Grandma’s fruitcake recipe and the family’s cabin in the woods. Some families even share business assets. One business entity that’s used for family business assets is the family limited partnership. It’s also a powerful estate planning tool.
It’s All In The Family Limited Partnership
Family limited partnerships (“FLP”) manage family assets. All the partners are family members, whether they are the general partner or the limited partners. According to the IRS, ‘family’ includes spouses, children, ancestors (parents or grandparents), lineal descendants (children, grandchildren, and great grandchildren) and the spouses of children, grandchildren, and great grandchildren.
A similar business entity is called the family limited liability company (“FLLC”). The main difference between the two involves the liability protection. FLLC’s provide limited liability to all partners, while the general partner of an FLP bears 100% of liability.
Remember that this is one place where business and pleasure don’t mix. Only business assets should be transferred to the FMP. However, if you want to transfer your house, for example, just make sure you’re paying a fair rent to continue living in it.
Setting Up Your Family Limited Partnership
Some of the advantages offered by an FLP include:
The general partner in an FLP continues to control assets.
Transferring assets upon the death of a partner is less complicated.
The partners may enjoy income tax benefits.
Because estate planning is simplified, estate tax may be reduced.
All limited partners in an FLP are protected from most creditor claims.
As with any estate planning tactic, some downsides exist:
Selling assets may raise capital gains issues.
The general partner of an FLP remains vulnerable to judgment and creditor claims.
This may not be the best way to transfer assets to minor beneficiaries. Partnerships cannot be offered to the under 18 set. A parent or guardian would have to manage a younger partner’s shares of an FLP.
Would A Family Limited Partnership Be A Good Fit For Your Family?
Transferring assets incorrectly to an FLP can raise suspicion at the IRS. Forming an FLP may not be the best solution for your family, so consult with an attorney first.
Keystone Law Firm
2701 W. Queen Creek Rd. #3
Chandler, AZ 85248
(480) 418-8448
https://www.KeystoneLawFirm.com