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Building Your Financial Fortress: How Family Limited Partnerships Can Safeguard Your Legacy

Posted by Scott Lynett, Esq. | Feb 16, 2024 | 0 Comments

Today, I'm excited to chat with you about a cool tool in the world of estate planning: Family Limited Partnerships (FLPs). But don't let the fancy name scare you off – I promise to break it down into bite-sized pieces so you can understand how FLPs can be your secret weapon in protecting your family's future.

What's a Family Limited Partnership Anyway?

Think of a Family Limited Partnership as a fortress for your assets. It's like building a protective wall around your family's wealth to shield it from taxes, lawsuits, and other threats. Here's how it works: you (the parent) create a partnership (or a Limited Liability Company) and transfer assets – like real estate, stocks, or businesses – into it. You become the general partner, calling the shots, while your kids or other family members become limited partners, owning shares but having less control.

Why Should You Care?

FLPs are like the Swiss Army knives of estate planning – versatile and super handy. They offer a bunch of benefits that can help you secure your legacy and minimize taxes:

1. Tax Savings Galore

By transferring assets into an FLP, you can take advantage of valuation discounts. This means the IRS sees your assets as less valuable because your kids or other family members have limited control over them. As a result, you can transfer more wealth to your heirs without triggering hefty gift or estate taxes.

2. Asset Protection

Life can be unpredictable, right? FLPs can act as a shield against potential lawsuits or creditors. Since your assets are held within the partnership, they're harder for outside parties to go after. It's like putting your valuables in a safe deposit box – they're still yours, but they're safer from prying hands.

3. Smooth Succession Planning

Passing the torch to the next generation can be a tricky business. FLPs make it easier by allowing you to gradually transfer ownership to your kids while maintaining control during your lifetime. Plus, since your kids are limited partners, they can't meddle too much – keeping family harmony intact.

How to Get Started

Now that you're sold on the idea of FLPs, you might be wondering how to set one up. It's not as daunting as it sounds. Here's a quick roadmap:

1. Consult with a Professional

Estate planning is serious business, so working with an experienced attorney or financial advisor who can guide you through the process and tailor the structure to your specific needs is essential.

2. Draft Your Partnership Agreement

This document lays out the rules of the game – who's the general partner, who are the limited partners, how profits and losses will be shared, etc. It's like the blueprint for your financial fortress.

3. Transfer Your Assets

Once your FLP is up and running, it's time to move your assets into the partnership. This might involve deeds, stock certificates, or other paperwork, so make sure to dot your i's and cross your t's.

With a Family Limited Partnership in your corner, you can sleep soundly knowing that your family's future is in good hands. Here's to building a solid financial fortress and protecting what matters most! For more information on the benefits of a Family Limited Partnership, use the link below to schedule a free consultation with my office today:

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