Lawsuit Protection

The Family Limited Partnership is an outstanding device for providing lawsuit protection for family wealth. When used as part of a properly designed overall strategy, an unsurpassed level of asset protection can be accomplished.

Under the typical arrangement, the FLP is set up so that Husband and Wife are each general partners. As such, they may own only a 1 or 2 percent interest in the partnership. The remaining interests are in the form of limited partnership interests. These interests will be held, directly or indirectly, by Husband, Wife, or other family members, depending upon a variety of factors which will be discussed.

After setting up the FLP, all family assets are transferred into it, including investments and business interests. When the transfers are complete, Husband and Wife no longer own a direct interest in these assets. Instead, they own a controlling interest in the FLP, and it is the FLP which owns the assets. As general partners, they have complete management and control over the affairs of the partnership and can buy or sell any assets they wish. They have the right to retain in the partnership proceeds from the sale of any partnership assets, or they can distribute these proceeds out to the partners.