How Family Limited Partnerships Can Protect Your Assets and Help with Succession Planning

There are many options to protect your family’s wealth and pass it down generations. Although no one really wants to think about estate planning, it is important. For families in Florida, using a Family Limited Partnership (FLP) can make this process a lot easier. FLPs are smart tools that help manage and protect family assets. They also make it easier to hand down wealth to the next generation. However, before setting one up, you should understand the benefits and the legal details involved.

What Exactly Is a Family Limited Partnership

An FLP is a legal setup where family members can manage their shared assets. There are two types of partners in an FLP: 

• General partners who run the business and make the decisions. They are in charge of everything. 
• Limited partners who are part of the partnership but have no control over daily operations. They mostly contribute money or assets.

Why Families Choose FLPs

There are several reasons why an FLP could be a smart move for families:

• Asset Protection: One of the biggest advantages of an FLP is that it protects family assets. Creditors cannot go after the partnership.
• Lower Taxes: FLPs can help reduce estate and gift taxes. By slowly giving limited partnership shares to family members, families can significantly save on taxes.
• Smooth Transition of Wealth: FLPs make it easier to transfer ownership to children or grandchildren.
• Flexibility: Every family has different goals. FLPs can be customized to fit specific needs, like deciding how profits are shared and who makes decisions.

Legalities to Consider

The Internal Revenue Service (IRS) keeps a close eye on FLPs, especially if it seems like the main goal is to avoid taxes. An FLP must have a real business or financial purpose to be considered legal. Also, general partners have unlimited liability. This means they are fully responsible for the partnership’s debts or legal issues. 

Do You Need Help in Drafting Effective FLP Agreements?

Planning for your family’s future is important, and using a Family Limited Partnership can be a great way to protect your wealth. If you are ready to take the next step, contact Schnauss Naugle Law in Florida for legal guidance that fits your family’s needs.