How a Family Limited Partnership is utilized in Asset Protection
The Family Limited Partnership is really a Limited Partnership formed to hold family assets such as a business or investment. The objective being for Parents to gift their limited partnership interests to their children, hence the term "Family Limited Partnership".
As with the Limited Partnership, the Family Limited Partnership has both General and Limited partners and a General Partner who has a 1% interest in the assets of the family limited partnership, will have 100% control of those assets.
The parents will generally transfer their assets to the family limited partnership, and retain 99% of those assets as Limited Partners until they are gifted to their children. The other 1% would be controlled by the General Partner who would be an LLC managed by the parents.
This raises the prospect of gift tax. In the U.S the parents may utilize their unified and estate tax credit to avoid any gift tax due on the transfer. Currently these credits will shelter the transfer of up to $3 million in assets, and these assets have to be business assets not the family home.
Features of The Family Limited Partnership
- General and Limited Partners
- May be utilized for asset protection
- May be utilized for Estate Planning
- Effective asset protection strategy in passing on assets to children