Protect Your Family’s Legacy with a Family Limited Partnership (FLP)

Imagine protecting your family’s legacy, lowering your estate taxes, and shielding your assets from lawsuits—all with one smart move. Sounds too good to be true? It’s not. It’s called a Family Limited Partnership (FLP), and it’s one of the most powerful tools in estate planning. If you’re looking for ways to protect your assets, smoothly transition your investments to the next generation, and reduce your estate taxes, you’ll want to know more about this strategy.

What Is a Family Limited Partnership?

A FLP is a limited partnership made up of a general partner and one or more limited partners. The general partner is typically a limited liability company (LLC) owned by a married couple or a single person. This general partner usually owns 1% of the FLP, while the married couple or single person initially owns the other 99% as limited partners. Over time, you can give limited partnership interests to your kids, gradually transferring wealth while maintaining control.

A FLP can own investments like stocks, brokerage accounts, property holdings (other than your homestead), and even business holdings (as long as they’re not taxed as S-corporations). However, it should not own your house, cars, boats, or other personal items.

How Does an FLP Protect Your Assets?

One of the biggest benefits of a FLP is asset protection. Assets inside a FLP are shielded from creditors’ judgments. Here’s how it works: if a family member who owns a portion of the FLP gets sued—maybe because of a car accident or personal debt—their creditors can’t force the FLP to hand over assets. Instead, the most they can get is a charging order, which entitles them to any distributions the partner would have received. If the FLP decides not to distribute anything, the creditor walks away empty-handed. This feature helps discourage lawsuits and keeps your family’s hard-earned wealth safe.

Reducing Estate and Gift Taxes

FLPs are also a smart way to reduce estate and gift taxes. Parents can give limited partnership interests to their children each year, taking advantage of the annual gift tax exclusion. These interests continue to grow outside of the parent’s taxable estate. Even better, FLP interests often qualify for valuation discounts because they’re harder to sell and offer less control. This means you can transfer more wealth at a lower tax cost while still keeping operational control as the general partner. In short, you get to manage your assets while efficiently passing wealth to your kids.

Is an FLP Right for You?

Before you jump into setting up a FLP, remember it’s not a one-size-fits-all solution. FLPs are complex and require a custom-drafted partnership agreement, a long-term plan, and the discipline to follow legal and tax formalities. If it’s not set up and managed properly, you could lose the protections it offers. Ask yourself: do you have business or investment assets you want to pass on to your family? Are you worried about potential lawsuits or protecting your wealth? Do you want to reduce estate taxes while maintaining control of your assets? If you answer yes to any of these, a FLP could be the perfect solution for you.

A Family Limited Partnership can help protect your assets, prepare your business for the future, and lower your tax burden—but only if it’s set up and managed correctly. Do you want to know if it’s the right fit for your family? Let’s talk. Contact us today to set up a consultation and start building a more secure future for your family.