VIEWS: 4 PAGES: 2 CATEGORY: Legal POSTED ON: 7/1/2011
If you have a family business that you would like to pass down to the next generation, a Family Limited Partnership may be an estate planning tool to consider.
Do you Need a Family Limited Partnership in Your Estate Plan? If you have a family business that you would like to pass down to the next generation, a Family Limited Partnership may be an estate planning tool to consider. If you have a family business that you would like to pass down to the next generation, a Family Limited Partnership may be an estate planning tool to consider. The Family Limited Partnership (FLP) is a limited partnership created to transfer ownership of assets to family members while minimizing the tax consequences. The FLP is designed to lower the value of your property for estate taxes, while still allowing you to keep full control of your estate within the partnership. Here’s how an FLP will normally function in the case of family businesses: Senior members of a family transfer the family business to the FLP, often the senior family members will own the limited partnership initially. In many cases the senior family members will begin a gifting program to make gifts of partnership interests to younger family members. The senior family members retain control of the partnership. The FLP allows elder family members to introduce younger members to the family business and investments, while limiting their liability. In FLPs, two types of partners are involved: The General Partners, who control the partnership; and Limited Partners, who earn a share of the profit but cannot exercise control of the business. The general partner is usually set up as an entity, normally a Corporation or a Limited Liability Company, owned by the parents. Usually, they will gift partnership interests to the children, as up to $13,000 annually (in 2011) can be gifted without tax consequences. The general partners control the day-to-day operations of the FLP and make investment decisions. They are also able to receive a management fee based on a percentage of the FLP’s income. Limited partners, normally the children or grandchildren, own an interest in the FLP. They share part of the income from the business, calculated on the number of shares they own. They do not normally control much of the business initially. When the heirs dissolve the FLP, the partnership’s property will pass to each limited partner based on their number of ownership shares. Work with an estate planning attorney to determine if a Family Limited Partnership will meet your needs, particularly if your needs are transferring assets to your children and grandchildren, while reducing estate taxes. Experienced estate planning attorneys Fayetteville AR of the Deborah Sexton Law Office PA offers estate planning and business planning resources to residents of Fayetteville AR. To learn more about these free resources, please visit www.arkansas-estateplanning.com today.
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