Virginia Beach Family Limited Partnership Lawyer
An Effective Estate Planning Tool for Generational Transfers of Wealth
It is common for individuals and couples to want to leave the bulk of their estate to their children and grandchildren but questions quickly arise about the best way to do so. One option is a Family Limited Partnership, a business entity that lets the property owners retain control of their assets and protect them while also creating a structure that transfers ownership in a tax-advantaged way. The Law Office of Angela N. Manz can help you decide whether this tool should be a component of your comprehensive estate plan. Contact our experienced Virginia Beach family limited partnership lawyers today to discuss your estate planning needs and goals.
What Is a Family Limited Partnership?
A Family Limited Partnership (FLP) is a sophisticated legal structure that allows families to manage and transfer wealth effectively. Essentially, an FLP involves the pooling of family assets into one partnership with both general and limited partners. This mechanism provides an array of benefits, including estate tax reductions, enhanced asset protection, and streamlined family business management.
A Family Limited Partnership is structured like a limited partnership, but all the partners are family members. The purpose of the partnership is to gradually transfer assets. Typically, one or two family members serve as the general partners and have full managerial control over the partnership’s assets. They assume liability for the partnership’s obligations and maintain the decision-making power. Other family members take on the role of limited partners. Limited partners have an ownership interest in the partnership but lack direct managerial control. As limited partners, their liability is limited to their investment in the FLP.
In most cases, grandparents are the general partners in the FLP, and their children and grandchildren are limited partners. The FLP owns and controls assets owned by the grandparents. At first, the general partners own the majority of shares in the partnership, but over time, they gift shares to the limited partners and the general partners may eventually own as little as one percent of the shares. Conversely, the number of shares owned by the limited partners starts out small and grows over time.
Key Benefits of Establishing a Family Limited Partnership
- Estate Tax Reduction: As the general partners gift partnership interests to the limited partners, the value of the general partners’ taxable estate decreases. Further, the value of these transferred interests may be discounted for tax purposes due to restrictions on marketability and control.
- Asset Protection: Assets placed within an FLP are generally shielded from personal creditors of the limited partners. If a limited partner encounters financial difficulties or litigation, the assets within the FLP remain secure.
- Centralized Management: FLPs enable a smooth transition of control and management for family-owned businesses. The structure ensures that key decision-making remains with the general partners.
- Flexibility in Distributing Income: The FLP framework allows for versatile distribution of income among partners, based on partnership agreement stipulations.
- Probate Avoidance: As shares in the partnership are transferred from the general partners to the limited partners, ownership of the assets in the partnership passes to the limited partners without going through probate. Transfer of assets outside of probate saves time and money and is a laudable goal of estate planning.
Factors to Consider Before Forming an FLP
While FLPs provide numerous advantages, they’re not suitable for every family. Here are some considerations:
- Cost of Formation and Maintenance: Creating an FLP requires thorough legal and possibly financial consultation. Moreover, ongoing compliance and administrative costs can be significant.
- Duration: Once formed, the dissolution of an FLP can be complicated, especially if not all family members agree.
- Potential for Family Conflict: Introducing a formalized structure can lead to family disagreements, especially if not all members are on board with decisions made by the general partners.
Contact The Law Office of Angela N. Manz for Help With Family Limited Partnerships in Virginia Beach
Family Limited Partnerships offer an effective estate planning tool for Virginia Beach families keen on preserving wealth, ensuring asset protection, and fostering a harmonious transition of family-owned enterprises. However, the complexity of FLPs necessitates an experienced legal perspective.
At The Law Office of Angela N. Manz, we are deeply familiar with the intricacies of FLPs and the specific legal landscape of Virginia trusts and estate laws. By partnering with us, you are ensuring your family’s financial future is crafted with precision, foresight, and in line with Virginia law. Contact us today to explore if a Family Limited Partnership aligns with your family’s estate planning goals.