Reduce Your Wealth Transfer Taxes With A Family Limited Partnership
This estate planning tool makes it easier to transfer capital in a tax-efficient manner, secure assets, and preserve a legacy. The family limited partnership (FLP) is a traditional method of transferring income and wealth to your children and future generations.
This wealth transfer was done in a very tax-efficient manner, as the FLP serves as a continuing legacy for this family. The FLP is growing and just moved into another state to take advantage of opportunity zone tax breaks.
How a family limited partnership operates
The parents form a family limited partnership. Initially, the parents will own the general partnership interests, say 2%. As general partners, the parents have nearly complete control over the company. A limited partner's voting rights are confined to particular topics, such as the company sale or dissolution approval. The remaining 98% of FLP interests are non-voting. The general partners or parents control all aspects of the FLP's day-to-day operations.
The parents, as general partners, maintain dictatorial control over the FLP. As general partners, the parents are also individually liable for FLP operations. Holding a general partnership interest in a limited liability corporation (LLC) owned and controlled by the parents provides excellent asset protection. At the same time, the parents can give as many or as few of the limited partnership interests to their children or grandchildren as they like. This decreases the parents' taxable estates and transfers some of the income to the next generation.
To talk more about this tax-reduction strategy and many other approaches that might be a good fit for you, click the button below to talk to a financial advisor today.
