Consider Estate Planning With a Family Limited Partnership. Call Us.
Forming a family limited partnership (FLP) 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:
- Estate planning
- Tax planning
- Asset protection
- Business succession planning
An FLP is very similar to a business partnership, except that all partners are within the same immediate or extended family. The word 'limited' is included for a reason. Under Texas laws, no single partner may have a controlling interest. Any of the family members will have equal control of the disposition of the assets, no matter how much or little they may contribute to the FLP every year.
What Is the Value of a Family Limited Partnership?
One of the advantages of an FLP is to avoid having earnings by family members subject to double-taxation as business earnings, then again as income tax. Family limited partnerships are entities that allow money to "pass through" without being taxed. A partnership is not like a corporate entity or an irrevocable trust. The FLP must file only 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 FLIP. 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 an attorney at Kerr, Hendershot & Cannon. 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 form one of the region's leading asset preservation teams, handling asset preservation transactional matters for individuals and families throughout South Texas. Contact us to arrange a consultation with an experienced attorney at our office in Houston or Corpus Christi.
