Family Limited Partnership (FLP)

What is ‘Family Limited Partnership – FLP’

A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family’s assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership’s holdings.

Explaining ‘Family Limited Partnership – FLP’

An FLP is different from a conventional trust, as family members actually own a share in a business. Shares can be gifted to family members over years, thus taking advantage of gift tax exemptions on an annual basis. The assets held in an FLP impact the level of estate tax savings that can be realized by using an FLP. In general, the more illiquid and complex the asset mix, the more difficult the FLP is to evaluate, and the larger the potential for estate tax savings.

Further Reading

  • Economic Substance Doctrine Applied to Determine the Validity of a Family Limited Partnership for Federal Transfer Tax Purposes: Knight v. Commissioner – [PDF]
  • Estate Planning with the Family Limited Partnership – [PDF]
  • The Managed Asset Portfolio Market Analysis in Litigation: Calculating Reliable Discounts for Lack of Marketability for Non-Controlling Family Limited Partnership … – [PDF]
  • Family limited partnerships: decanting family investment assets into new bottles – [PDF]
  • Making Sense of Family Limited Partnership Law After Strangi and Stone: A Better Approach to Planning and Litigation Through the Bona Fide Transaction Exception – [PDF]
  • Family Limited Partnerships – [PDF]
  • Death and Taxes: The Family Limited Partnership and Its Use in Estate Planning after the Third Circuit's Ruling in Estate of Thompson v. Commissioner – [PDF]
  • Family Limited Partnerships and Family Limited Liability Companies – [PDF]