What is a Family Limited Partnership?
Estate Planning Lawyer in Denver, CO
A family limited partnership (FLP) is an especially popular estate planning strategy for farmers, ranchers and small business owners who are actively involved in the day to day operations of their businesses, and who anticipate having a taxable estate.
Because an FLP is such an effective tool for reducing federal estate taxes , it may be subject to an IRS audit after the death of the General Partners. For this reason the services of a skilled and experienced attorney are required to establish and maintain an FLP.
What Is a Family Limited Partnership?
An FLP is a business entity consisting of two classes of partners:
- General partners, who operate and control the partnership
- Limited partners, who have no voting rights, but are entitled to profits based on their percentage of ownership
Typically, general partners are parents and the limited partners are their children and, in some instances, their grandchildren. Initially, the general partners own 100% of the FLP shares. However, over a period of time the ownership percentage changes as the general partners gift shares to the limited partners using their annual gift exclusion of $14,000 per person and their lifetime gift exclusion of $5,250,000.
The result is that the general partners are able to reduce their federal estate tax liability while maintaining control over the family business. Another advantage of an FLP is that shares cannot be seized by creditors. An FLP also provides a vehicle for shifting income to children and grandchildren who are typically in a lower income tax bracket than the parents.
Assistance with Creating an FLP
The James A. Littlepage Law Offices has helped countless clients during more than 40 years of practice, and we can assist you with creating a family limited partnership to protect your loved ones and business. James Littlepage is a proven estate planning lawyer in Denver who was recognized with a 2015 and 2016 Five Star Estate Planning Attorney℠ award. In 2014, 2013, 2012, 2011 and 2010 he received the Five Star Wealth Manager℠ award, as seen in 5280 and ColoradoBiz magazines. He has the knowledge and skill needed to draft an estate plan that fulfills Colorado law and achieves your goals for the future.