Family Limited Partnership (FLP) good estate planning
A great number of people have been told that Family Limited Partnerships (FLPs) are an excellent estate-planning tool. In a sense, this is true. And should the members of someone’s family feel that they have the assets sufficient enough to warrant setting up a limited partnership, then they could save up to 30 percent on the value of the assets in that family limited partnership for estate tax purposes?
There are other benefits to FLPs. Using a limited liability partnership structure such as this can be a useful means of protecting family assets from creditors. Similarly, if a person is considering remarriage and has children from a previous marriage, then using FLPs structure can help to protect the children’s future inheritance from any claim the new spouse may have.
However, there is a downside to Family Limited Partnerships. Although FLPS can be a very useful tool for families to protect their assets for the next generation, it must be remembered that FLPs are not always the best tool for estate planning. This is because some assets cannot be included in the assets of an FLP, such as S-corporation securities, qualified plans, and personal items.
Additionally, in order to be of any great benefit, assets qualifying for inclusion in an FLP have to be in excess of $1 million, otherwise, other estate-planning vehicles, such as a life insurance trust, would become a more cost-effective means of estate-planning. In addition, at an overall cost of over $100,000 to maintain, an FLP is not necessarily the cheapest means available for someone wishing to protect his family’s assets into the next generation.
In fact, it appears that the best bet for FLPs are cases where there is a fairly affluent patriarch who has invested most of his money in real estate but does not yet feel ready to turn over control of his life’s savings into a trust. Under circumstances such as these, a limited liability partnership could be just the thing for someone to protect the family’s potential assets!
Family Limited Partnerships