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Breta Grumbois, CRPC®
Vice President, Wealth Management
Fibre Financial Group
Retirement and Investment Services
Located at Fibre Federal Credit Union
822 Commerce Avenue, Longview, WA 98632
Phone: 360-414-4223
Email: bgrumbois@fibrecu.com
September/October 2024
Preserve Wealth with an FLP
A family limited partnership (FLP) is a business or holding company owned by two or more family members. It is designed to preserve a family’s wealth and pass it from one generation to another through tax-free transfers of assets, including cash, real estate or the family business.
Partnerships
An FLP consists of two types of partners: general partners and limited partners. General partners typically own the largest share of the business and have control over asset management and decision-making. They may take a management fee from the profits. Limited partners contribute capital and have limited or no roles in daily business operations.How to Create an FLP
Creating an FLP involves several steps:- Choosing the family members (partners) who will manage and own FLP assets;
- Drafting a partnership agreement specifying each partner’s responsibilities and ownership percentages;
- Contributing assets, including investments, real estate or business interests. The FLP then becomes the owner of the assets;
- Valuing the assets for tax purposes and establishing each partner’s initial interest by employing an independent appraiser;
- Filing paperwork with the state where the FLP was established; and
- Maintaining compliance by adhering to terms of the partnership agreement and following all legal requirements.
FLP Advantages
An FLP can be an effective tool for transferring wealth to future generations, while reducing or eliminating gift and estate taxes. Individuals can gift FLP interests tax free each year, up to the annual gift-tax exclusion — currently, $18,000 or $36,000 for a married couple — to as many individuals as they choose. Assets in the FLP also gain some protection from creditors and lawsuits.FLP Disadvantages
FLPs are costly to set up and maintain. Expenses include legal and administrative fees, maintenance costs, and the hiring of professionals to ensure compliance with complex regulations. Family disagreements over management, asset distribution and decisionmaking can jeopardize wealth and relationships. An FLP’s limited liquidity can create problems during financial emergencies or when family members have different financial needs. There is also the risk of members incurring debt that impacts other FLP members.Tax laws governing FLPs are complex. Families should consult a qualified tax professional, estate planning attorney and financial professional before proceeding.
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Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Fibre Federal Credit Union and Fibre Financial Group Retirement and Investment Services are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using Fibre Financial Group Retirement and Investment Services, and may also be employees of Fibre Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of Fibre Federal Credit Union or Fibre Financial Group Retirement and Investment Services. Securities and insurance offered through LPL or its affiliates are:
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