A family limited partnership is frequently the choice of forward-thinking, successful parents who recognize the need to protect their assets and provide for the generations that follow. Consider the story of Gene and his wife, Charlotte, who own several prosperous restaurants in Port St. Lucie, Stuart, and Palm City, Florida. As they begin their annual estate plan review, they re-examine their goals.
Gene and Charlotte have two children. Their son, Grayson, helps manage the restaurants. However, their daughter Courtney lives and works out of state. Gene and Charlotte want to make sure both their children and their grandchildren benefit from their success.
Luckily, Gene and Charlotte have many estate planning tools at their disposal. They know they want to take advantage of some tax benefits. They also want their family to maintain control over their assets like their investment portfolio and their family business. They know there are advantages and disadvantages to all of the options at their disposal.
A family limited partnership, or FLP, is a limited partnership created to manage a family’s business assets.
The partnership consists of a general partner and at least one limited partner. General partners and limited partners must be family members.
The IRS definition of family includes: any spouse, ancestors, children, grandchildren, great grandchildren, and spouses of children, grandchildren, and great grandchildren.
There are disadvantages to using a family limited partnership:
Both Family Limited Partnerships and trusts are meant to transfer wealth efficiently. FLPs are meant to organize a business’s ownership. A trust is a fiduciary agreement in which a third party holds assets on behalf of the beneficiaries designated by the creator of the trust. Trusts encompass a wide range of forms and serve various purposes that go beyond the scope of solely family business matters.
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