Form a Family Limited Partnership

The University of Connecticut
by B. Patrick O’Donnell Jr., J.D., L.L.M., C.L.U.

For owners of family businesses, the issue of succession invariably becomes a terrible dilemma: How to transfer assets to the next generation while simultaneously maintaining controlover major decisions and avoiding crippling estate tax liabilities.

Growing numbers of owners are discovering a suitable answer in an estate and financialplanning technique known as a Family Limited Partnership (FLP). In an FLP, control lies withthe general partners, who can have a tiny equity ownership (as little as 1%, although 5% is morethe norm) while still retaining control and deciding how much partnership income goes to thelimited partners. The general partners are the decision makers and the limited partners hold mostof the equity. More…