Part Four

What happens to my property taxes?

When done correctly, there will be no property tax reassessment. A change in ownership does not include a transfer between any person and a partnership in which the proportionate share of that person’s ownership in the subject real estate remains the same.

In establishing your partnership with your children, a small percentage of the interest in the underlying real estate will be transferred first to the children. Together, both you and your children transfer the real estate to the Family Limited Partnership and, in return, will receive partnership shares in the same proportion to your ownership in the real estate. How will placing my real property in an FLP affect the risk of liability for other assets?

Placing real property into a Family Limited Partnership should reduce the risk that liability originating in assets in one Family Limited Partnership would reach to other assets. Generally, a creditor of a Family Limited Partnership will be limited to the assets of that limited partnership to satisfy partnership liability. In order to reach other assets, the creditor has to prove personal liability of either yourself or another general partner or some liability existing prior to the creation of the Family Limited Partnership in order to reach your personal assets or those of another general partner.

How does a Family Limited Partnership affect the risk of a liability experienced by my children?

Your children will experience no liability as limited partners, other than the investment they have in the limited partnership. As general partners, they would have some potential liability, just as the operator of any business would. However, the children are unlikely to be a managing general partner and, therefore, are unlikely to have such additional liability until after you have either passed on or resigned as managing general partner. This liability could be protected further by having a trust or limited liability company, wholly-owned by your children, act as the successor general partner.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.