When considering your estate planning options, you may be interested in using a family limited partnership if you want to keep wealth in the family. After you learn a little more about the FLP in California, talk to your estate planning lawyer about the benefits of setting one up.
What Is a Family Limited Partnership?
A family limited partnership (FLP) is a type of limited partnership, which is a business ownership structure. In a limited partnership, there is at least one general partner who assumes personal liability for any debts of the partnership. Also, there is at least one limited partner whose liability is limited to the amount of his or her investment in the partnership.
Typically, a husband, wife, and/or specially set up LLC are general partners in a family limited partnership. The husband or wife have a small general partner share of the FLP. The limited partners usually include the husband, wife, and other relatives (people can be both general and limited partners). The husband and wife may own a majority interest in the FLP as limited partners. The husband and wife contribute assets to the FLP in exchange for their partnership interests.
If the family chooses an LLC as the general partner, then the husband and wife are usually members of the LLC. As a result, they control the FLP through their membership in the LLC. But they are protected from creditors accessing their personal assets to fulfill FLP debts.
How Are FLPs Useful for Estate Planning in California?
Partners in a family limited partnership can gradually pass their partnership interests on to children or grandchildren. The partnership interests can also move to a living trust, irrevocable trust, or some other estate planning structure. They can transfer the partnership interests directly or they can make gradual gifts.
In this way, the original FLP partners can ensure that assets stay in the family for generations while the family maintains liability protection. California extended families may want to use FLPs for family businesses, assets currently owned by multiple family members, and more.
Planning your estate and interested in using an FLP? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.