A family limited partnership (FPO) is a valuable estate planning tool for many individuals and families. A PLF is not limited to high net worth individuals and high net worth properties. With an FLP, you can achieve many of the estate planning goals that are important to you with an estate planning vehicle. An estate planning lawyer in Texas provides the necessary guidance to set up an FLP to ensure that the FLP complies with all relevant laws and meets your estate planning goals. Texas families often turn to family limited partnerships (FLPs) to reduce inheritance tax and protect financial assets during transition periods such as the death, incapacity for work, or retirement of the business owner or primary estate holder. If your extended family has significant business or inherited assets that need to be protected, forming an FLP may be the right option. In some families, parents establish FLP as equal partners. At some point in the future, parents will begin giving their children and grandchildren shares of the FLP each year as sponsors. However, some families may start FLP by naming all adult family members as partners. The implementation of the FLP depends on the objectives and financial and estate needs of the family. As a general partner, the original person who made the calls buys 500 shares by contributing $50,000 to the FLP. Family members buy the remaining shares. Now, each family member owns a share of an FLP starting at $500,000.
Then, the general partner could get an initial mortgage for the rest of the $500,000 to launch the $1 million luxury housing project. If you have a large family business fortune, it is important to keep it in the family. Without adequate protection, family assets can face creditors and high tax burdens that can reduce their value. Family limited partnerships are a very valuable tool that can allow a family to pass on assets with a lower tax burden to younger family members. However, the IRS has looked at these types of partnerships in recent years. Keep in mind that there must be an actual business associated with the partnership and the assets must not be used for non-commercial purposes, otherwise the IRS will ignore the partnership structure. It`s important to hire a competent business or estate lawyer to navigate some of the potential pitfalls of a family limited partnership. For many clients, a lawyer can handle the formation of an FLP for an affordable lump sum. Feel free to use the form below to request a free consultation or call our office during regular business hours. The general partner you control retains control of the transactions and makes investment decisions.
She and many other family members were named sponsors. Limited partners have an interest in the business, but leave management decisions to the general partner. The use of limited partnerships in Texas for estate planning is a popular and beneficial strategy that has been used by estate and asset protection lawyers for several years. While there is no legal or technical difference between a limited partnership and a family limited partnership, the latter is simply a partnership compromised by related persons. Most people use a family limited partnership for one or more estate planning purposes. In most cases, an FLP serves the following purposes: During your first consultation, we can help you determine if an FLP makes sense to you and your family. Call us at (972) 497-1010 or email us to make an appointment. In practice, older members of a family usually act as general partners, while younger family members acquire limited partnerships.
For example, a husband and wife could form a PLF that acquires all the general and limited interests of the partnership and then transfers their personal assets (real estate, shares, bonds, etc.) to the partnership. Each year, husband and wife may pass on the interests of the limited partnership to their children. An FLP can be a great estate planning tool for many families. But remember, every family is different and family goals should be discussed with an estate planning lawyer to make sure you use everything the law allows. A family limited partnership (FFP) is a tool that allows you to consolidate and protect your assets. Through an FLP, you form a limited partnership that involves two types of partners: general and limited. Are you worried about divorce? An FLP protects assets from claims from future creditors and/or ex-spouses. Creditors may not force cash distributions, vote or have the participation of a limited partner without the consent of the general partners. If there is a divorce and a limited partner ceases to be a family member, partnership documents may require a transfer to the family at fair market value, with the assets remaining in the family. A family limited partnership is usually formed by married couples who contribute assets to the FLP and act as general partners. They can then grant children limited interests of up to 99% of the value of flp`s assets.
In this case, the assets are removed from the estates of the general partners, which saves future inheritance tax. General partners retain control of the FLP and its assets, even though they can only hold 1% of the value of the asset. Sponsors may receive distributions from the FLP and benefit from certain tax benefits. Asset protection is another attractive feature of FLP. The company`s assets are protected from the creditors of the limited partners. Interests in a PLF can easily be divided among family members, each of whom may have different amounts. The FLP makes it possible to transfer ownership of a business to the younger generation, while allowing the older generation to continue to carry out operations, supervise and take care of young owners. One of the essential benefits of a properly set up and maintained FLP is that it can reduce the value of gifts to your children and grandchildren.
The value of any limited interest you give reduces the value of your taxable estate and, therefore, the tax your heirs would have to pay upon your death. .