A Family Limited Partnership (FLP) trust is an estate planning strategy that allows families to manage and transfer wealth while minimizing taxes and protecting assets. It involves creating a partnership where family members can hold shares, often used to pass down business interests, real estate, or other valuable assets. An FLP trust can provide control over how assets are used, reduce estate taxes, and shield assets from potential creditors or lawsuits.
At OC Wills & Trusts, we’ve been helping Orange County families create smart, effective estate plans since 2008. Our attorneys understand how to structure Family Limited Partnership trusts to align with your long-term goals. We offer honest, upfront pricing with no hidden fees and are committed to building a plan that fits your unique needs. Reach out today to schedule a consultation and learn how an FLP trust can benefit your family.
How Does a Family Limited Partnership Trust Work?
A Family Limited Partnership (FLP) is a legal entity used for joint ownership, often as part of an estate plan. It includes at least one general partner—usually a parent or grandparent—who controls the assets and handles management, and one or more limited partners, such as children or grandchildren, who have no control but share in profits.
General partners typically contribute most of the assets and make decisions. Limited partners receive income based on their share but have limited liability. FLPs are pass-through entities, meaning the partnership isn’t taxed directly—partners pay taxes on any income they receive.
Benefits of Creating an FLP
There is a range of potential benefits associated with choosing an FLP as a vehicle for estate planning. One of the biggest draws for many families is the option to give tax-free gifts to members.
Placing assets in an FLP also reduces the taxable estate, as an FLP is not subject to estate tax. Flexibility in directing assets, retaining control, and protecting future wealth are other advantages.
Annual Gifting and Estate Tax
The way gifting works with an FLP is that you place assets in the entity and then gift shares to partners, or family members. Assets could include investments, real estate like rental properties, and even businesses.
By gifting shares to limited partners, you essentially give them dividends and other profits proportional to their stake in the FLP. Any assets in the FLP are excluded from your estate, meaning they will not be subject to estate tax at the time of your death.
Asset Control and Flexibility
As a general partner directing an FLP, you can elect to give yourself a share of profits or set an annual fixed salary. This ensures you control how the assets are managed, and you can continue to benefit from them during your lifetime.
Provisions can be put in place to appoint a new general partner in the event of your death, or you might choose to dissolve the FLP. This legal structure can be customized in various ways to suit your family’s needs and your wishes for passing on wealth to loved ones.
Create and Protect Future Wealth
Like some trust structures, an FLP can help protect assets against outside threats like lawsuits and claims from creditors, former spouses, and even certain family members, if that is your wish.
It also offers a range of potential tax advantages to help preserve and pass along wealth. If you want to continue to manage assets yourself, an FLP offers the ability to do so.
Contact Our Orange County Family Limited Partnership TrustWith offices in Irvine, Huntington Beach, and Anaheim, OC Wills & Trust Attorneys also serves clients throughout Southern California, including Mission Viejo, Huntington Beach, Costa Mesa, Seal Beach, Long Beach, Fountain Valley, Newport Beach, and the greater Orange County area. Attorney
If your estate is sizable and you are considering strategies for preserving generational wealth, succession planning for family businesses, and maintaining control over assets during your lifetime, family limited partnerships are a great option to explore.
The capable and experienced lawyers at OC Wills & Trust Attorneys are committed to offering the legal guidance, support, and estate planning services Orange County, CA, residents need to make informed decisions about their family’s future. Contact us to schedule a complimentary consultation and create a personalized estate plan.
With offices in Irvine, Huntington Beach, and Anaheim, OC Wills & Trust Attorneys also serves clients throughout Southern California, including Mission Viejo, Huntington Beach, Costa Mesa, Seal Beach, Long Beach, Fountain Valley, Newport Beach, and the greater Orange County area.
