What Is A Family Limited Partnership?

by Bruce Givner on October 26, 2011

A family limited partnership is a partnership in which mom and dad contribute valuable investment assets and then transfer limited partnership interests to their children or, better, to an irrevocable trust for the benefit of their children and grandchildren. The general partner of the family limited partnership is a corporation wholly owned by yet another irrevocable trust for the benefit of the children and grandchildren. Mom and dad can be the officers and members of the board of directors of the corporate general partner. But they cannot own the stock of the corporate general partner. Why? If they own the corporate GP, that stock would be an asset a creditor could take. If they own the stock, there be would be no valuation discounts on gifts of limited partnership interests to the children’s trust and there would be no valuation discounts on the limited partnership interests retained by the parents at death.

Mom and dad might transfer their family limited partnership interests to the trust for the children and grandchildren in a variety of ways including outright gifts; part-gifts, part-sales; using a private annuity, a grantor retained annuity trust and/or a self-canceling installment note. In future blogs we’ll discuss the advantages and disadvantages of family limited partnerships. Contact Givner & Kaye today. www.GivnerKaye.com (310) 207-8008

{ 2 comments… read them below or add one }

Anika Figliola November 2, 2011 at 7:19 am

Well I really liked reading it. This subject offered by you is very practical for accurate planning.

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admin November 2, 2011 at 9:28 am

Thank you Anika. Do you already have an estate plan?

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