Brian R. Katz
Benefits of a Family
In 2018, federal estate taxes generated about $23 billion in tax revenue. The federal estate tax often amounts to double taxation, which puts an unfair burden on family-owned businesses and farms. Thankfully, the family limited partnership serves as a powerful estate planning tool that enables the transfer of business ownership from one generation to the next in a smooth and tax-efficient way.
If you are ready to create a family limited partnership, I can provide you with the detailed guidance and advocacy you need to understand your options. As an experienced business law attorney, I will help preserve your family business and protect your legacy. Katz Business Law proudly serves clients throughout Granite Bay, California, and surrounding communities of Folsom, Rosehill, Rocklin, and Auburn.
What is a Family Limited Partnership?
In recent years, family limited partnerships (FLP) have become an increasingly popular family strategy for both estate planning and asset protection. A family limited partnership can be described as a partnership agreement that exists between family members and relatives who are
There are two types of partnership interests involved in a family limited partnership:
General Partner: The general partners, usually the parents, have the responsibility of making key decisions regarding the management of the FLP. Additionally, they have unlimited liability.
Limited Partner: The limited partners do not have any say regarding the management and investment decisions of the FLP. Though, they have limited liability.
What are the Advantages?
There are several advantages of an FLP including:
Taxation: An FLP offers substantial estate tax-saving benefits. It is structured to take advantage of the Internal Revenue Services (IRS) annual gift tax exclusion. Furthermore, any future increase in the value of an asset placed in an FLP stays in the FLP rather than being included in the parent's estate.
Agreement: The FLP's structure enables parents to maintain control and continue running the business in their capacity as general partners. This means that they will continue their role making key decisions regarding the management of the business.
Limited Creditors and Partners: In the FLP, spouses, children, and grandchildren hold limited partnership interests. Hence, creditors can't gain control of these interests without the parent's consent. Likewise, creditors can't force the FPL to distribute cash.
Estate Planning: An FLP is an invaluable estate planning tool. It enables the transfer of the business, real estate, and assets to future generations while preserving control and saving taxes.
Are There Any Disadvantages?
Disadvantages of using the family limited partnership as an estate planning tool may include:
- General partners have unlimited liability and could be at risk. They may be exposed to potential liability involving the partnership.
- There are restrictions on the types of assets transferred into the FLP. Transferring personal assets into an FLP isn't an option.
- Spouses, children, and grandchildren may be exposed to substantial capital gains liability.
- Transferring FLP ownership to children under 18 years of age may be extremely difficult.
- Setting up the FLP can be complex. It’s important to consult an experienced attorney for proper guidance.
How Strategic Legal Counsel Can Help
FLPs can be established to allow tax-efficient transfers of the family business. If you are interested in creating a family limited partnership, hiring a knowledgeable business law attorney is crucial for proper guidance.
At Katz Business Law, I have dedicated my career to providing strong representation and legal counsel in business law and estate planning-related matters. As your attorney, I can help you:
- Draft the FLP agreement and any other associated trust documents
- Effectively create the FLP under California law
- File all the necessary forms and required documentation with the appropriate state agencies
- Transfer title to all assets contributed to the FLP
Your business is your life and family legacy. Let me help you protect it.
Work with an Experienced Business Law
Attorney in Granite Bay, California
A family limited partnership remains a powerful estate planning tool for a smooth and tax-efficient transfer of the family business from one generation to the next. Contact Katz Business Law today to schedule a free one-on-one consultation. I can provide detailed legal guidance and help you navigate key decisions. I represent clients throughout Granite Bay, Folsom, Rosehill, Rocklin, and Auburn, California.