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 have been written about extensively in every national publication from the Wall Street Journal to Forbes Magazine. A Google search of Family Limited Partnerships will return thousands of hits with many law firms and accounting firms extolling its virtues.

In this chapter, 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 is generally not 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.

See “Recent Developments” for more details on current Family Limited Partnership  issues .