Family Limited Partnerships
The family limited partnership can be a very useful component of a person's complete estate planning package. The purpose is to transfer assets from parents to beneficiaries (usually children and grandchildren) in such a way that estate taxes are minimized. However, one must use caution in setting up an FLP; it is vital to hire a College Station limited partnership attorney in order to ensure that this is done properly.
The Use and Function of Family Limited Partnerships
Generally speaking, parents will set up an FLP in order to pass assets on to their children while reducing tax liability. An FLP actually follows a business organization model, and the Internal Revenue Service regards it as such. As a College Station limited partnership attorney can tell you, the IRS keeps a keen eye on such partnerships to determine whether they are handled properly.
Because a family limited partnership is a kind of business, only certain types of assets should be included. A principal residence, for instance, would not be appropriate to place in the FLP. Cash assets, stocks, rental properties, and other assets are more typically transferred into it.
How the FLP Works
When your College Station limited partnership attorney helps you set up the FLP, which assets are to be included will be determined. Once the partnership is in place, you and your spouse will be general partners. It helps to think in terms of a business with general and limited partners. The latter in an FLP are the children who are to be beneficiaries of the assets.
You and your spouse, then, acquire interest in the partnership; they also appropriate the limited partnership shares. They then move assets into the partnership. Each year thereafter they give shares to their children.
The reason an FLP provides tax relief is that the assets that are transferred to limited partnership interests are discounted because they are considered less valuable. In essence, then, one transfers assets into the hands of beneficiaries in such a way that tax exposure is reduced.
Speak with a College Station limited partnership attorney for More Information
If you need assistance with setting up a limited family partnership, or have another estate planning need, a College Station limited partnership attorney at Peterson Law Group will be happy to work with you. We will provide you with the highest standard of legal assistance. Call today to arrange a consultation at 979-703-7014.