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Owning your own business or investment portfolio can be incredibly rewarding. However, to preserve the fruits of your labor and dedication, you must do everything you can to protect it. Whether you seek to protect yourself, your investments, and your family from taxes, creditors, or probate, a family limited partnership (FLP) is a strategy worth considering.
What is a family limited partnership?
An FLP is an entity owned by two or more family members, created to hold the accounts, properties, or businesses that are owned by one or more of the family members. An FLP has at least one general partner who is responsible for the management of the partnership, has unlimited liability, and is compensated by the partnership for their work according to the partnership agreement. An FLP also has one or more limited partners who are permitted to vote on the partnership agreement and are not authorized to manage the partnership. The limited partners receive the income and profits of the partnership and have no liability. Often, one or both parents are general partners because they contribute accounts, properties, or a business they own to the FLP and want to retain control of them as they transfer them to the next generation. To facilitate this transition, the children are given limited partnership interests while the parents retain general partnership interests.
What are the benefits of using an FLP?
This estate planning strategy is useful for the following reasons:
What are the downsides of using an FLP?
While there are several benefits to using an FLP, there are a few disadvantages that must be considered:
Could this be the best solution for you?
If you have a business or investment portfolio that you want to plan for, we would love to discuss ways you can pass it on to the next generation while protecting your life savings, minimizing taxes, and maintaining control for as long as you want. To discuss this strategy and create a unique plan to protect you and your family, please give me a call, or Contact us today to get started.