Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out

Do you Need a Family Limited Partnership in Your Estate Plan?

VIEWS: 4 PAGES: 2

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.

More Info
  • pg 1
									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.

								
To top