When you are devising a financial plan as a small business owner, you should consider the importance of asset protection. There are always going to be individuals who look for targets in this litigious society, and you have to take the appropriate steps if you want to make sure that your assets are protected from litigants. With this in mind, let’s look at the value of family limited partnerships.
Family Limited Partnerships
Of course, anyone can be sued, but people who are involved in certain businesses are particularly vulnerable. For example, consider the situation that a landlord would be in. Tenants and visitors could potentially get injured on rented property, and this would be an ongoing possibility.
Doctors are also quite vulnerable to legal actions. They are viewed as “deep pocket targets” by opportunistic types, and they are inherently exposed to malpractice actions.
A family limited partnership could potentially provide an asset protection solution. The person who creates the partnership would serve as the general partner. As the general partner, you could name people in your family to act as limited partners. The general partner is the only partner with decision-making authority, so you would be in complete control of the decision-making process.
If you were to convey a business that you own into the family limited partnership, it would no longer be in your direct personal possession. As a result, if you are a landlord, and you convey an apartment building into the partnership, your personal assets could not be targeted if someone was injured in that apartment building.
To amplify the value of a family limited partnership by way of example, let’s say that you are a real estate investor who owns five different apartment buildings. You could place each respective property building into a separate family limited partnership, and you would be limiting your exposure to lawsuits.
If someone in the partnership was to be sued, the assets in the partnership would not be in play, and this is another asset protection benefit that you gain when you create a family limited partnership.
As you can see, a family limited partnership can be of great value if you are a businessperson who is looking for asset protection solutions. However, in addition to the asset protection benefits, family limited partnerships are often utilized by people who are exposed to death taxes.
Assets can be transferred among the members of the partnership at a tax discount, and you could potentially use the annual gift tax exclusion to provide family members with shares in the partnership without incurring any transfer tax liability.
Download Our Special Report
In this brief piece we have provided some basic facts, but you can obtain more comprehensive information about family limited partnerships if you download our in-depth special report.
This informative report is being offered to our readers on a complimentary basis right now, and you can click the following link to obtain access: Family Limited Partnership Report.
Latest posts by Barry D. Horowitz, Estate Planning Attorney (see all)
- Can a Home Be Purchased with a Special Needs Trust? - January 21, 2020
- How to Incorporate a Domestic Asset Protection Trust into Your Estate Plan - January 16, 2020
- How Long Does It Take to Probate an Estate in Connecticut? - January 14, 2020