Family Asset Protection Partnerships
A Family Limited Partnership is a popular asset protection and wealth management strategy for shifting ownership of assets to children or other family members without sacrificing management or control over the assets. The unique features of the Family Limited Partnership are often used to reduce overall family income taxes, minimize or eliminate estate taxes and provide asset protection from lawsuit liability claims.
Family Limited Partnership Management and Control
The Family Limited Partnership typically operates in this manner: Some portion of family savings and investments are transferred by parents into a Family Limited Partnership- a specially designed limited partnership legal entity. The parents (or an LLC) may serve as the general partners, owning a specified percentage of the Family Limited Partnership interests. The parents can also own some or all of the limited partnership interests, depending on what the goals are and what is to be accomplished. The general partner is responsible for management of the partnership and it’s assets. Limited partners are not permitted to participate in management, except for limited voting rights on matters specified in the Family Limited Partnership Agreement.
Holding assets within a Family Limited Partnership allows value to be fractionalized and shifted among family members in this manner. Ownership of particular assets remain intact within the Family Limited Partnership while management and control of the assets are maintained by the general partners. By transferring limited partnership interests to children, asset values can be shifted from parents to children to achieve important tax and asset protection benefits.
A Family Limited Partnership may also play an important role in protecting assets from lawsuit liability claims. Assets within the Family Limited Partnership cannot be legally seized by a judgment creditor of a partner. Instead, the law provides that the creditor’s remedy is limited to a charging order or sometimes a foreclosure- and these limitations can provide effective asset protection outcomes when properly structured.
We have included a very detailed discussions of the law concerning Family Limited Partnerships, tax treatment and asset protection issues in the Asset Protection Law Library on this website.