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If you have never heard of the Family Limited Partnership (FLP), you are not alone. This relatively unknown estate-planning tool can help families save a lot of money from the clutches of the United States’ gift and estate taxes
Three Questions About the Family Limited Partnership If you have never heard of the Family Limited Partnership (FLP), you are not alone. This relatively unknown estate-planning tool can help families save a lot of money from the clutches of the United States’ gift and estate taxes. If you would like to learn more about the FLP, the following questions and answers should provide you with a basic understanding of this important tool. 1. What is an FLP? Quite simply, an FLP is a limited partnership. The difference between an FLP and a regular limited partnership is that the FLP is controlled by family members. Just like a limited partnership, the FLP has two types of partners. The general partner is the workhorse of the arrangement, bearing all of the liability in exchange for all of the control over management and investment decisions; the limited partner has no decision-making role in exchange for limited liability. 2. Won’t it result in double taxation? No, the FLP is not taxable. The partners simply report the partnership’s income and deductions on their individual income tax returns, but they do so in accordance with the proportion of their ownership interest in the partnership. 3. How does this save money on taxes? The limited partnerships may be transferred to other family members. Therefore, if grandpa transfers his limited partnership interest to his son, such transfer serves to reduce the size of grandpa’s taxable estate when it comes to the federal estate tax. Additionally, the transfer of a limited partnership interest is eligible for the annual gift tax exclusion. Experienced estate planning attorneys Greensboro NC of the Law Offices of Cheryl David offers estate planning and business planning resources to residents of Greensboro NC. To learn more about these free resources, please visit http://www.cheryldavid.com today.
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