A “Family” Limited Partnership (FLP) is a Limited Partnership where most of the partners arc members of the same family group. Contact Legally Mine today for more information!
2. Family Limited
Partnership
• A “Family” Limited Partnership (FLP)
is a Limited Partnership where most
of the partners arc members of the
same family group. In 2004, a U.S.
Court of Appeals held that family
members can enter into valid Family
Limited Partnerships. A variety of
other courts have also noted that
there is no distinction between a
Family Limited Partnership and any
other type of Limited Partnership,
and FLP’s can hold and protect a
home.
3. Continued
• In a typical FLP, someone in the
family, or corporation or
limited liability company they
control, acts as the general
partner so that control is
retained by one or more family
members. If a FLP operates a
family business, the parent
that manages the business
could serve as the general
partner and the children,
spouse, or other family
members could be limited
partners.
4. Continued
• If the FLP is used to own family
investments, the spouse with
the least risk and the children
are often limited partners,
while both spouses, or their
trusts, would otherwise be the
general partners. You should
make certain that in placing a
residence into a FLP that only
those holding title to the
residence are the initial
owners of the FLP, and that
they own both in the same
percentages of ownership.
5. Conclusion
• This is because in recent years
the IRS has scrutinized the FLP
for valuation, estate, and gift
tax purposes. These questions,
however, only arise if there has
been a “transfer” as defined in
the federal tax laws. No gift tax
is imposed if a taxpayer makes
a transfer to himself. And,
where a taxpayer contributes
property to a FLP which he
owns in the same percentage
as he owned the contributed
property, there is also no gift
tax, since there is deemed to
have been no “transfer.”