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Monday, January 13, 2020

Understanding Family LImited Partnerships in Florida

Families that own a business or have substantial assets may want to consider forming a Family Limited Partnership to protect their assets for future generations. There are many benefits of using a Family Limited Partnership as part of a comprehensive estate plan. However, these partnerships must be created very carefully to ensure that the benefits of the partnership are not lost. A Florida estate planning and real estate attorney can help develop a partnership agreement that protects your family’s legacy for generations to come.

What is a Family Limited Partnership?

A Family Limited Partnership (FLP) is similar to other types of partnerships. The FLP is made up of two types of partners — general partners and limited partners. General partners have full voting rights and control the management and operation of the partnership. Limited partners do not participate in management, but they also enjoy limited liability for the partnership’s debts and liabilities.

As a partnership, it is a pass-through tax entity. The income from the partnership “passes through” the business to the individual partners to be taxed as income on their personal tax returns.

Benefits of Florida Family Limited Partnerships

One of the best benefits of a Family Limited Partnership (FLP) is the ability to protect assets from outside creditors and parties. The assets held by the FLP cannot be claimed for payment of partners’ personal debts. The partnership agreement can include a clause that requires any spouse who has an interest in the partnership to sell the interest back to the partnership at fair market value in the event of a divorce. This provision ensures that the assets remain in the family, even in the event of a divorce.

From an estate planning perspective, an FLP can help avoid expensive gift and estate taxes for high-net-worth individuals and families. Senior members of the family transfer limited partnership interests to family members to reduce the value of their estate. Because the interest is limited, the senior family members retain control over the assets and investments while reducing the taxable value of their estate. Annual gift tax exclusions also apply to transfers of limited partnership interests, which can reduce tax liabilities.

A family who has substantial assets to invest may benefit from combining those assets under one investment account. Combining assets can reduce investment fees and costs while expanding investment opportunities.

Are There Disadvantages of Family Limited Partnerships?

While an FLP may sound great, it is not necessarily the right choice for all families. There could be some disadvantages of using an FLP for some assets. For instance, capital gains issues could be a problem depending on the type of property being transferred through the FLP. Also, general partners do not enjoy limited liability. They have no asset protection if the partnership is sued. FLPs are also not suitable for transferring assets to family members who are under 18 years of age.

Contact a Florida Estate Planning & Real Estate Attorney for Help

A Family Limited Partnership could be a valuable tool for estate planning and asset protection. However, it is always best to consult an experienced Florida estate planning and real estate attorney before taking any steps. There could be additional options that offer more benefits or tools that can be used with an FLP to provide optimum benefits and protection for family assets. Contact us today.


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The Law Office of Jeffrey A. Herzog, P.A. assists clients in Florida, including North Pinellas County, Palm Harbor, Trinity, West Pasco County, and the surrounding areas.



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