Houston Family Limited Partnership Attorney

Family Limited Partnerships

Protect Your Assets and Reduce Estate taxes through FLPs

A Family Limited Partnership (FLP) is often used to transfer wealth from one generation to another.  An FLP is a limited partnership among members of a family who are involved in a business or trade. Forming and funding an FLP can provide estate and gift tax savings and asset protection. Additionally, an FLP can allow you to retain control over the assets while benefitting from asset protection, and estate and gift tax savings.

How the FLP Works

Establishing an FLP allows you to transfer your assets to the entity and make gifts of limited partnership interest to your children or other beneficiaries. This simultaneously achieves a number of estate planning objectives. 

First, as you shift the value of assets to other limited partners of the FLP, you reduce the value of your taxable estate and consequently, any tax on the value of the transfer that your estate would have had to pay upon your death, would be saved.  If the gifts are made within the annual gift tax exclusion amount, you will not have to pay any gift tax on the transfer. However, the gift tax amount depends on the specific amount gifted in any year. 

In addition, the value of the partnership interests transferred to your beneficiaries/limited partners is less than the corresponding value of the assets in the partnership. The application of a minority discount can be helpful in reducing the value of the limited partnership interests you are gifting since limited partners do not have the authority to direct or control the day-to-day operation of the partnership. Furthermore, because the partnership is a closely held entity and not publicly-traded, a discount may be applied based upon the lack of marketability of the limited partnership interest. Current proposed legislation may eliminate these discounts so it is important to check with your attorney regarding the status of this issue. This process allows you to leverage the FLP as a tool to transfer more wealth to your beneficiaries, while retaining control of the limited partnership interests.  Lastly, a properly structured FLP can have creditor protection characteristics since the general partners are not obligated to distribute earnings of the partnership.

Contact Schnurr Law Firm for Complex Estate Planning in Houston, TX

We assist with sound succession planning and can help you save estate taxes. Contact our office for an appointment to see if a Family Limited Partnership is right for you and your family.

Schnurr Law Firm, PLLC serves clients throughout the greater Houston area, including, but not limited to Houston, Bellaire, West University, Sugar Land, Missouri City, Richmond, Rosenberg, Katy, Cypress, The Woodlands, Kingwood, League City, Webster, Clear Lake, Pearland, Angleton, and throughout Harris County, Fort Bend County, Montgomery County, Brazoria County and Galveston County.

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