Asset protection is important for some professionals, business people, and investors. A family limited partnership (FLP) can be the ideal solution, and we will provide the details here.
Basic Structure
There is nothing deceiving about the name of this asset protection structure. The members of an FLP must all be in the same family.
If you establish a family limited partnership, you would be the general partner, and the family members that you include would be limited partners.
You do not have to worry about whipping any votes before you can take actions, because the general partner has sole decision-making authority.
Control Everything From a Legal Distance
The ultimate goal of asset protection is to maintain control of the resources without directly owning them. A family limited partnership gives you the ability to strike this ideal balance.
To explain the way that someone could use family limited partnerships to great advantage, we will provide a simple example. Jennifer is a pediatrician, and she invests in rental properties to earn additional income. She has three apartment buildings and a shopping center.
Injuries can occur on these properties, and she would be viewed as a deep pocket target by personal injury attorneys. She has to take steps to protect her assets, so she puts each rental property into a separate family limited partnership.
If someone is injured in the shopping center, the litigant would sue the family limited partnership that owns that property. Their attorney would soon find out that a bank holds the mortgage, and the other investment properties would be protected.
She conveys her bank and brokerage accounts into a family limited partnership for low risk assets, and her home is tucked away in another family limited partnership. As a result, if she is personally targeted, her assets would be protected.
With regard to her medical practice, it has been registered as a professional corporation, and all of the stock is owned by a dedicated family limited partnership. If she is sued, she could stop taking a salary and the corporation could distribute earnings and management fees to the FLP.
The assets in all of these family limited partnerships would be protected if another partner is personally sued, so there is asset protection in all directions.
Estate Tax Efficiency
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Mr. Nirenstein is licensed to practice before the courts of the State of Connecticut and the United States District Court. He is a member of the Connecticut and Hartford County Bar Associations, and the Estate and Probate, Elder Law, Business Law and Real Estate Sections of the Connecticut Bar Association.
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