Family Limited Partnerships (FLPs) and creditor protection

Family Limited Partnerships (FLPs) offer creditor protection. A creditor can only seize the debtor’s partnership interest and not the underlying assets owned by the FLP. Since the holder of a limited partnership interest has no say in the daily affairs of the partnership, the seizing creditor would be unable to compel distributions from the partnership. However, the creditor, as the limited partner, will be taxed on the pro-rata share of the partnership’s profits.