Why Make a Family Limited Partnership Part of an Estate Plan?

Illinois high net-worth families have unique interests to consider when setting up their estate plans to protect their assets for the future of their families. This is particularly important because Illinois is one of the few states that have passed a state estate tax. Estates in Illinois are also subject to the federal estate tax. An attorney who understands the complexities of structuring high-net worth Illinois estate plans may suggest the formation of a Family Limited Partnership (FLP) as part of an estate plan.

What is a Family Limited Partnership (FLP)?

A Family Limited Partnership (FLP) is a business entity created specifically for an estate plan.  Under an FLP, families combine their assets and investments into one family structure. When you create an FLP, your estate will be treated almost like a business with general and limited partners. Generally, the parents will be the general partners who make the decisions for the family, and the children will be limited partners making income and sharing in the ownership interest but without decision-making control. 

How can an FLP Benefit Your Estate Plan?

An FLP can be a great strategy for wealthy individuals to structure their estate plan for several reasons, including: 

• Tax Benefits: An FLP has significant tax benefits. Large estates can bypass some significant tax liabilities by using this legal structure.  For instance, FLPs are not taxable, so its members can report any income and deductions on their own tax return. Because of the tax benefits of the FLP, by transferring assets to an FLP, an estate can minimize its tax burden while retaining control of assets. The lack of limited partner control inherent in the FLP structure also means that the IRS will consider it to have a reduced market value, and therefore a reduced tax liability.
• Asset Protection: Creditors cannot reach the assets of a limited partner because they have no control. 
• Ownership Transfer: An FLP allows family members to transfer ownership of assets through transfer of their limited partnership interests.

Contact a Naperville, IL High Net Worth Estate Planning Lawyer

There are many tools available to the high net worth client to maximize their estate using complex legal structures. An experienced and knowledgeable attorney can advise on the many benefits of this estate planning tool as part of a comprehensive estate plan. Our Naperville, IL estate planning lawyer can advise on whether an FLP is right for your family. The unique approach to client service of Gierach Law Firm can help you achieve your estate planning goals. Call 630-228-9413 today to schedule a consultation.