Family Limited Partnership Structures
Family Limited Partnership (FLP) is actually a slang term used by asset protection planners. You will not find the term “family limited partnership” in any statute, and it won’t be found anywhere in the Internal Revenue Code (IRC). All family limited partnership really is simply a limited partnership formed to hold together a family business or investments, with the objective that the parents will bequeath their limited partnership interests onto their children.
Because the limited partnership interests are illiquid they should be subject to substantial discounts for federal gift and estate tax planning purposes.
Family Limited Partnerships have some attraction as asset protection vehicles, primarily because the limited partnership interests in some states may be subject to charging order protection.
Family Limited Partnerships are widely touted by attorneys, financial planners, certified public accountants, and other planners because of the potential federal gift and estate tax benefits and the potential asset protection benefits. However, Family Limited Partnerships are also being promoted by a number of “scam” artists who shamelessly sell a one-size-fits-all FLP structure and even do it yourself style kits which allow clients to engage in their own FLP planning.
Family Limited Partnerships are very powerful estate and asset protection planning tools when used correctly. The only drawback of FLPs is that they are almost never correctly utilized. Because of this, Family Limited Partnerships often fail to produce their promised benefits.
Family Limited Partnerships