The family limited partnership (“FLP”) provides strategic estate planning, enabling not only a reduced transaction cost on family succession, but a conveyance of family values between generations.
The term FLP conjures more a grouping of planning concepts than any particular legal structure, and is used in the context of partnerships, limited liability companies (“LLC”), and like entities, wherein it may be combined with other planning tools. There are several common features with all FLPs:
- Flow-Through Entity. One is that a conveyance occurs into an entity that has “flow-through” characteristics for income tax purposes (i.e., the entity is essentially not taxable).
- Conveyance. Two is that there is a degree (partial or complete) of conveyance, present or future, in income/principal from one generation to a younger generation.
- Asset Protection. Three is the entity is provides a form of asset protection, either with respect to the assets held or to protect one generation from follies of the other generation.
Beyond that, anything can happen. Accordingly, this outline introduces FLPs as a tool, outlining several key relevant legal and tax issues associated with FLPs. In reading this outline, unless specifically intended to explain a type of entity, the term FLP includes the use of LLCs.
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