Family Limited Partnerships (FLPs)

Family Limited Partnerships (FLPs):

Preserving Wealth for Generations

A Family Limited Partnership is a form of holding property that combines some of the advantages of holding property as a corporation with some of the advantages of owning property in a partnership. A Family Limited Partnership is sometimes used as a vehicle for a gift program to reduce or eliminate estate tax.  Here we will provide more information on this Estate Planning tool, and how Anthony Rinaldi and Company, LLC can help you and your family with a wealth preservation strategy.

What is a Family Limited Partnership?

A Family Limited Partnership (FLP) is a legal entity created to manage, protect, and transfer family assets. It combines elements of partnership and limited liability, allowing family members to pool their resources while maintaining control over their assets. An FLP typically involves the following key components:

1. General Partners: Typically, parents or grandparents who maintain control over the FLP and make decisions regarding its assets and operations.
2. Limited Partners: Family members, such as children or grandchildren, who contribute assets to the FLP but have limited involvement in its management.

Advantages of Establishing an FLP

1. Asset Protection: FLPs provide a strong shield against creditors and potential lawsuits. Assets held within an FLP are generally protected from personal liabilities.
2. Estate Tax Mitigation: One of the primary benefits of an FLP is its ability to minimize estate taxes. By discounting the value of limited partnership interests, you can reduce the overall estate tax burden.
3. Simplified Succession Planning: An FLP facilitates the seamless transfer of assets from one generation to the next, ensuring your family's financial legacy endures.
4. Asset Consolidation: Consolidating family assets within an FLP can simplify management and streamline decision-making.

Creating and Operating an FLP

1. Formation: To establish an FLP, you'll need to create a formal partnership agreement outlining the roles and responsibilities of both general and limited partners.
2. Funding: Transfer assets into the FLP, and allocate partnership interests accordingly. Seek the guidance of a skilled attorney to navigate the complexities of valuation and gifting.
3. Management: The general partners are responsible for day-to-day operations and decision-making, while limited partners typically enjoy passive ownership.
4. Compliance: Ensure your FLP complies with state laws and regulations. Annual meetings and proper record-keeping are essential to maintaining its legal status.

Key Considerations and Pitfalls

1. Consult Legal Experts: FLPs are complex legal entities, and their creation requires careful consideration. Always seek advice from experienced Estate Planning attorneys like Anthony Rinaldi & Company.
2. Avoid Self-Dealing: General partners must act in the best interests of all partners and avoid any conflicts of interest.
3. Clear Communication: Open and transparent communication among family members is crucial to prevent disputes and maintain the FLP's integrity.
4. Asset Appraisal: Properly valuing assets during the funding process is critical to avoid disputes with tax authorities.

Is an FLP Right for You?

Every family's financial situation is unique. To determine if a Family Limited Partnership aligns with your estate planning goals, you can contact Anthony Rinaldi & Company, LLC for a consultation. We will carefully evaluate your individual circumstances, provide guidance, and assist you in creating a tailored plan that ensures the preservation of your family's wealth.