When planning your estate, one of your most important concerns is how to protect assets and make sure that loved ones receive these with as few hassles as possible. Tax minimization and wealth preservation are your primary goals, and there are plenty of ways to achieve both. When you work with the Stockton, CA attorneys of Shore, McKinley, Conger & Jolley, LLP, we will take time to ensure you understand all of your options and how they can benefit you.
Some of our clients who require estate planning assistance ask us about family limited partnerships. Let’s cover the basics of family limited partnerships and why they may be a good option for you and your needs.
What Is a Family Limited Partnership?
A family limited partnership is a type of limited partnership that is established between family members. In a family limited partnership, family members have joint-ownership of family-owned assets.
Partners in a Family Limited Partnership
While in a family limited partnership, family members serve as either general partners or limited partners.
- General Partners - General partners are responsible for daily management of the family limited partnership, which includes controlling administrative and investment decisions.
- Limited Partners - Limited partners have no management responsibilities in a family limited partnership, and are only partially liable.
How Family Limited Partnerships Work
Generally speaking, a parent or grandparent contributes assets to a family limited partnership in exchange for a small general partner interest and a large limited partner interest. The parents/grandparents can then give all or a portion of their limited partner interested to their heirs.
The Benefits of Family Limited Partnerships
A family limited partnership is not taxable per se. Instead, the owners of a family limited partnership report the partnership’s income and deductions when filing their own personal tax returns. This is great as a tax minimization strategy, while still allowing general partners in the family limited partnership to control their assets.
Transferring limited partnership interests is also eligible for the gift tax exclusion, which is extremely helpful for reducing income tax, estate tax, and gift tax.
If situations within a family change, family limited partnerships also allow the general partners to alter partnership agreements as needed. This flexibility can be incredibly helpful.
When a Family Limited Partnership Should Be Considered
Generally speaking, family limited partnerships should only be considered if you have significant assets to be protected while planning your estate. People with numerous investments and properties who are successful in their careers and finances should definitely discuss family limited partnerships with our attorneys. We can determine if it’s an ideal option for you, or if there is another option or series of options to keep in mind as you figure out the best way to protect and divide assets among loved ones.
Contact Our Law Firm
For more information about estate planning and what you can do to protect and control your assets, be sure to contact our team of attorneys. The lawyers of Shore, McKinley, Conger & Jolley, LLP are here to help. You can reach our legal teams in Stockton and Walnut Creek by phone at (209) 477-8171.