CONTACT US
Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.
1021223-00006-00
David Miller, MS, CFP®, CRPC®
Financial Advisor
CA Insurance Lic. #0G61348
Prudential Advisors
1706 Plum Lane, Suite 128
Redlands, CA 92374
Phone: 909-709-9978
Email: david.miller@prudential.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.
1081090-00001-00
Offering investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Prudential and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Prudential, the Prudential logo, and the Rock Symbol are service marks of Prudential Financial Inc., and its related entities, registered in many jurisdictions worldwide. Prudential Advisors is a brand name of The Prudential Insurance Company of America and its subsidiaries.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products or services, but rather provide general information about the subject matter covered only.
Prudential Advisors and LTM Marketing Specialists LLC are unrelated companies. This publication was prepared for the publication’s provider by LTM Client Marketing, an unrelated third party. Articles are not written or produced by the named representative.
The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.