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How can a family limited partnership protect your family’s wealth?

On Behalf of | Jan 21, 2025 | Estate Planning

Have you ever wondered how to protect your family’s wealth while potentially reducing estate taxes? A family limited partnership (FLP) might be the solution you are looking for. This powerful estate planning tool has gained popularity among families seeking to preserve their assets for future generations.

What is a family limited partnership?

A family limited partnership is a legal entity that allows you to transfer ownership of your assets to a partnership structure. You and your spouse would typically serve as general partners. This allows you to control your assets while your children or other family members become limited partners. This arrangement may offer several advantages in estate planning and tax management.

What are its potential benefits for estate planning?

One of the primary benefits of an FLP is asset protection. Transferring your assets into the partnership may shield them from creditors and potential lawsuits. This may be particularly valuable if you own a business. It might also be beneficial if you have significant personal wealth.

Additionally, FLPs could facilitate the smooth transfer of wealth to your heirs. As limited partners, your children can gradually receive ownership interests. This allows for a controlled transition of assets over time.

How does it minimize estate taxes?

One of the most attractive features of an FLP is its potential to reduce estate taxes. Here is how it might work:

  • You may gift partnership interests to your heirs annually, taking advantage of the gift tax exclusion.
  • Lack of control and marketability may discount the value of the limited partnership interests. This could potentially lower the overall taxable value of your estate.

Tax laws are complex and subject to change. Consider consulting an attorney to determine if an FLP suits your situation.

A family limited partnership could be valuable in your estate planning arsenal. By offering asset protection, facilitating wealth transfer and potentially minimizing estate taxes, it might help you secure your family’s financial future.

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