How a family limited partnership works
A family limited partnership holds family assets in a structured entity that lets you transfer ownership to children over time, retain management control, and add a layer of asset protection. Done right, it can move significant value out of your estate while keeping you in charge.
These are the questions that matter most when you’re thinking about a family limited partnership.
What is a family limited partnership?
It is a limited partnership owned by family members that holds investments, real estate, or business interests. The senior generation usually controls management; the next generation receives ownership over time.
Control role
General partner
Manages the partnership’s assets, decides on distributions and investments. Typically held by the senior generation or an LLC. Holds a small percentage of total ownership.
Ownership role
Limited partners
Hold the bulk of economic ownership. No management role or voting control. Interests can be gifted to children or trusts. Receive distributions when the GP declares them.
How does it help with estate transfer?
Limited partnership interests transferred to children are valued at a discount from the underlying asset value, reflecting the lack of control and lack of marketability of those interests.
That discount lets you move more value out of your estate using less of your gift and estate tax exemption. You stay in control as general partner while ownership gradually shifts to the next generation.
How does it provide asset protection?
Family assets inside the FLP are owned by the partnership, not by individual family members. A creditor of a limited partner typically can reach only that partner’s distributions, not the underlying assets.
| How creditors reach the assets | Held personally | Held in an FLP |
|---|---|---|
| Owned by the partnership entity. | ||
| Creditors typically limited to a charging order. | ||
| Underlying assets stay in the family. | ||
| Separation between ownership and management. | ||
| Owned outright by the family member. | ||
| Fully exposed to that person’s creditors. | ||
| Can be reached in a lawsuit or divorce. | ||
| Difficult to separate from personal liability. |
When does an FLP make sense?
Five short choices. Brent reads your answer back to you at the end.
A 30-second guided quiz. Get a personal read on whether an FLP fits.
How Brent helps you
- Looks at whether an FLP actually fits your assets and your family before recommending one
- Drafts the partnership agreement, GP structure, and gifting plan as one coordinated whole
- Coordinates valuations and gift-tax reporting with your CPA so the discounts hold up
- Helps you maintain the formalities that keep the FLP’s protections intact
