Are you concerned about how your wealth will be distributed and protected for future generations? A Family Limited Partnership (FLP) might be a strategic tool for your estate plan.
An FLP is a legal entity that allows families to pool assets together while providing tax and financial benefits. It’s structured with two types of partners:
- General Partners: Typically family members with control over the partnership’s decisions.
- Limited Partners: Family members who invest in the partnership but have limited involvement in management.
How Does an FLP Work?
To set up an FLP, family members contribute assets to the partnership in exchange for partnership interests. The general partner, usually holding a small percentage of ownership, manages the partnership’s assets. The remaining ownership is divided among limited partners.
Benefits of an FLP
- Estate Tax Reduction: By transferring assets to the FLP, you can reduce your taxable estate. The value of your partnership interest is often lower than the underlying assets, leading to potential estate tax savings.
- Asset Protection: FLPs can provide a layer of protection for your assets from creditors and lawsuits.
- Business Succession Planning: FLPs can be used to transition ownership of a family business to the next generation while maintaining control.
- Gift Tax Planning: You can make gifts of limited partnership interests to family members without incurring immediate gift tax consequences.
Is an FLP Right for You?
While FLPs offer significant advantages, they are complex legal structures. Factors to consider include the size of your estate, your family’s goals, and potential state and federal tax implications.
Consulting an Estate Planning Attorney
Creating an FLP requires careful planning and legal expertise. An experienced estate planning attorney can help you determine if an FLP is suitable for your situation, assist in the formation of the partnership, and address potential challenges. If you’re in Illinois or Wisconsin, we can help. Contact us today to see if this is the right path for your family.
This article is intended to serve as a general summary of the issues outlined therein. While this article may include general guidance, it is not intended as, nor is a substitute for, qualified legal advice. Your review or receipt of this article by Lexern Law Offices, Ltd. (the “LLG”) or any of its attorneys does not create an attorney-client relationship between you and the LLG. The opinions expressed in this article are those of the authors of the article and do not reflect the opinion of the LLG. Please note that this article may have been generated using AI technology.
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