Family Limited Partnership: Overview
Over the past decade, the Family Limited Partnership (FLP) has risen from obscurity as a little known tax loophole, into a prominent strategy for asset protection and estate planning. The asset protection and estate planning benefits of the Family Limited Partnership are widely known and have been written about extensively in every national publication from the Wall Street Journal to Forbes Magazine.
In this section, we will look at the Family Limited Partnership and discuss realistically and critically what this technique can and cannot accomplish. Recent law changes and cases highlight the advantages and opportunities of the FLP, and we will also point out some of the common pitfalls and traps that should help you to proceed with a clear understanding of planning strategies available with the FLP.
In particular, a crucial point to proper planning with a Family Limited Partnership, is that the remedy of a creditor may or may not be limited to a charging order. The trend in legislation and case law, is to allow a creditor to foreclose on a limited partnership interest (or an LLC interest). The foreclosure remedy is a key consideration in asset protection planing with a Family Limited Partnership.
Family Limited Partnerships for Asset Protection and Estate Tax Savings
A Family Limited Partnership often serves as a valuable component of sophisticated asset protection and estate plans. Estate of Shurtz vs. Commissioner (T.C. Memo 2010-21) illustrates the key factors that the courts have looked at when taxpayers have used Family Limited Partnerships to achieve significant estate tax benefits.
“Recent Developments” for more details on current Family Limited Partnership issues .