Although many people are familiar with a family limited partnership, some do not fully understand the benefits. In short, this is a limited partnership controlled by family members. Just the same as other types of limited partnerships, it is controlled by two types of partners:
- General partners
- Limited partners
General partners are responsible for the management of the partnership as well as all investment decisions. These people take on 100 percent of the liability.
Limited partners are not permitted to manage the family limited partnership. Along with this, they are exposed to a minimum amount of liability.
Note: a family limited partnership is not taxable. However, this does not mean taxes are not a concern. Instead, the owners are responsible for reporting income and deductions on their personal returns, based on their interest in the partnership.
What are the Benefits of a Family Limited Partnership?
Like any estate planning strategy, you must be aware of the benefits associated with a family limited partnership before moving forward.
One of the primary benefits is the ability to reduce the taxable estate of senior family members. These people transfer the value of assets to their children, which takes it out of their estate, subsequently reducing the amount of estate tax that is paid. Best yet, these family members retain control over the decisions that are made.
Did you know that a family limited partnership could also protect assets from claims by future creditors? Along with this, it goes a long way in protecting assets in the event of a failed marriage. For example, if a divorce leads to a limited partner leaving the family, the partnership documents can require assets to be transferred back to the family at fair market value.
Getting Started with a Family Limited Partnership in Madison
At this point, you may be interested in forming a family limited partnership. Before you make a final decision, you must discuss your situation, as well as the pros and cons, with an experienced Madison estate planning attorney.
A family limited partnership in Madison is not something you create on a whim, hoping that it works in the favor of you and your family. The process can be complicated, with many important steps that must be taken along the way.
Over the years, we have helped many families setup this type of partnership. Contact us to discuss your case and decide if a family limited partnership in Madison is the right financial move at the present time. Go to KH-LAW.net to schedule your consultation.