Family Limited Partnerships
The Family Limited Partnership (FLP) has been a primary asset protection tool for many years. Originally designed as a tax savings strategy to shift income to lower bracket family members, Family Limited Partnerships are now widely used to reduce estate taxes (where applicable) and protect accumulated wealth from potential claims.
Itís important that you know a Family Limited Partnership in and of itself is not the "be all end all" asset protection strategy. It does have itís benefits however and we feel itís important to explain it for you here.
A Family Limited Partnership is simply a Limited Partnership with special features designed to create tax savings and/or accomplish other asset protection goals. It is set up in such a way that you, or you and your spouse, are General Partners in the business in question, each owning a small (1%-2%) interest. "Safe assets"óthose not likely to produce liabilityósuch as bank and brokerage accounts, as well as other passive investments (not real estate), are generally transferred into the Family Limited Partnership.
The Family Limited Partnership works well for asset protection because the laws in every state do not permit a creditor to seize or collect against property held by the partnership. The property transferred to the Family Limited Partnership is generally safe from attack, but the creditor may attempt to reach your ownership interests in the partnership.
Although a Family Limited Partnership on itís own does offer substantial added protection against collection activities, such as "Charging Orders" and foreclosure, the limited partnership interests in the Family Limited Partnership are usually protected by using a Kinetic Asset Protection Trust in conjunction with the Family Limited Partnership.