Family Limited Partnership (FLP)

How it Works

FLPs are used to shift income and appreciation to your children. Assets are placed in an FLP in exchange for general and limited partnership units that are given to children or grandchildren. The partnership interests give them ownership, but no right to control activities. To achieve income, estate and gift tax advantages, the partnership should be funded with appreciating assets or assets that generate a current income stream.

Advantages

• Reduces taxable estate by giving away assets while retaining control of the assets and the income they produce.
• Owner doesn't give up control of assets and can receive a salary for management duties.
• If life insurance is a partnership asset, only a portion of the proceeds that relate to the ownership interest will be included in the estate.