Family limited partnerships (FLP) are very similar to a business partnership, except that all partners are within the same immediate or extended family. Forming a family limited partnership to protect your family's estate assets from a heavy tax burden was once thought to be an estate preservation instrument used only by the wealthy. However, today there are many purposes to form a family limited partnership, including:
The primary goal of a family limited partnership is to protect your family's assets and preserve its wealth. The assets of an FLP are not owned by any one person, but belong to the FLP itself-which means all its assets are immune to pursuit by creditors, collection agencies, ex-spouses, plaintiffs, and any who might have a claim to a family member's personal assets. Under the law, your FLP ensures protection of your assets as long as they are placed under the name of the FLP.
The FLP files an annual tax return that reports income and expenses for the entity, but no earnings or contributions will be taxed as income. Under a typical arrangement, each family partner receives a share of the income, proportionate to the amount of annual investment in the FLP.
It bears repeating: The money used to fund the family partnership is not taxed as income.
Only the amount of distribution to each partner is subject to annual income tax. To learn more about the advantages of setting up a family limited partnership, talk to a Houston estate planning attorney at Hendershot, Cannon, Martin & Hisey. We will explain the requirements, as well as the advantages and benefits your family can gain. FLPs are not without some potential fallout from IRS tax rulings. We will explain whether they are the best option for your family. Our lawyers are one of the leading asset preservation teams in Texas.
Contact us or call (713) 909-7323 to arrange a consultation with an experienced attorney.