Red Rock Corporate Solutions Estate Planning & Asset Protection Division
Our estate planning attorney offers years of experience in helping people to protect their assets and plan for their families’ future. We can help you with multiple levels of asset protection from a simple will to advanced trusts and partnership structuring that can also help you to avoid costly probate expenses for your trustees. We are a trust company that offers many types of trusts and partnerships that can be custom tailored to fit your specific situation such as; living trusts, revocable living trusts, supplemental need trusts, limited liability limited partnerships, family limited partnerships, etc. We also can help you to protect your self with all types of life insurance. When you incorporate or do an LLC formation, we can show you how to create the strongest possible personal separation utilizing advanced living trust and family limited partnership structuring so that your personal exposure is minimized to the fullest.
HOW DO FAMILY LIMITED PARTNERSHIPS WORK?
The first step to legally and properly structure an FLP (or Family Limited Partnership) is to make sure it is structured to your specific needs. Second, the partnership agreement has to be established and ownership must be carefully decided. Third, the assets have to be properly transferred and entitled into the FLP. A key point to remember is that an FLP is only as strong as the legal language written within it when structured.
Once these steps have been completed it becomes very difficult for a creditor to attack the Family Limited Partnership. If a creditor gets a judgment against you and or your estate, that still does not give him the right to take the assets held in the FLP. The creditor would have to go back to court and obtain another judgment called a charging order. The charging order allows the creditor to receive your share of the distributions from the FLP. If nothing is distributed then creditor receives nothing. The creditor cannot take your position and run or remove you from the FLP. Creditors cannot force the sale or distribution of assets. If the FLP has undistributed profits, the creditor receives a K-1 and must pay the taxes on the money never received and will probably never receive. Based on the creditor protection of a Family Limited Partnership, few creditors ever go for the charging order.
The partnership agreement is confidential and is not registered or filed with any federal or state government agency. Only the partners know what the agreement states and who the limited partners are and what assets are owned by the Family Limited Partnership.
One concern most individuals have is the taxation. An FLP does not have the double taxation like an corporation, which makes it an excellent domestic asset protection structure when it is properly structured and implemented.
