Family Limited Partnership (aka FLP) is a common tool utilized by families running their business and investment assets. It is used by parents and grandparents as an avenue to transfer assets to children and children’s children during their lifetimes and at their deaths.
What are the advantages of utilizing an FLP?
It will help reduce the size of taxable estate while control and management of the assets are retained
Help to effectively compound available gifts and estate tax credits and exemptions
Used as a tool to spread income among children and grandchildren (family members who are often in lower marginal income tax brackets)
It will effectively place assets beyond the reach of creditors
Help in integrating family members with their family-run business.
General vs. Limited FLP
An FLP usually has two types of partnership interests – general and limited.
Retains the general interest in the partnership, which means retaining control over the assets transferred into the partnership
Has the power to make and impose decisions about operations and all of the activities done within the partnership
The one who creates FLP may designate themselves as the general partner
Limited partners of FLP can be the children and grandchildren
They enjoy limited powers in the partnership
In general, they have no voice when it comes to management and control over partnership interests – regardless of whether they have bought the interests or made some contributions
Limited partners are regarded as passive investors in FLP who have little influence about how the FLP is managed
Reducing estate tax with FLP
With the help of proper estate planning, one is able to reduce the size of their taxable estate – a way to achieve a substantial estate tax savings. Establishing an FLP is one effective way to do it. This is through gifting interests in the FLP during one’s lifetime to his/her children and grandchildren.
FLP helps reduce the size of taxable estate while keeping assets in the FLP intact and in a continued control by the general partner.
Other benefits of using FLP
It helps reduce the value of one’s estate by the income and appreciation attributable to the gifted interests
Through lifetime gifting of FLP interests, further enhancement of gift and estate tax savings is achieved
Provides ability to shift income derived from partnership capital away to the recipient of one’s gifted FLP interests
Protection of assets from the claims of creditors
Provides an avenue to train family members on how to run a business.
In need of a Family Limited Partnership attorney in San Diego?
If you live in San Diego or in the surrounding areas and want to learn more about FLP, ask our legal experts today. You can contact us at the Law Offices of Ronald R. Webb. We will cater to all your FLP inquiries.
The Law Offices of Ronald R. Webb is dedicated to providing innovative, client-centered representation throughout San Diego, including the communities of Del Mar, La Jolla, La Mesa, El Cajon, Spring Valley, National City, Kearney Mesa, Encinitas, Carlsbad, Oceanside, San Marcos, Escondido, Rancho Santa Fe, Vista, Solona Beach, Coronado, Ocean Beach, Hillcrest, Mission Valley, University City, Del Sur, Rancho Bernardo, Rancho Penasquitos, La Costa