Ownership by Spouses

The first alternative is that Husband and Wife (or a single individual) hold all or most of the limited partnership interests. The apparent advantage of this arrangement is that it is attractive and convenient. Control is maintained through the general partnership, and equity is preserved through the ownership of the limited partnership interests. The disadvantages of this format are that the interests retained by Husband and Wife are subject to a charging order or may be foreclosed by a successful creditor, eliminating any intended asset protection benefits. In light of these potential problems, we can conclude that ownership of FLP interests (or LLC interests) in an unprotected form by an individual, Husband and Wife, or a living trust, creates significantdanger and risk of foreclosure and loss. In some circumstances, that amount of the loss may even exceed the amount of a potential judgment.

Related link:
Recent Developments with Family Limited Partnerships and Limited Liability Companies