Family Limited Partnerships Attorneys in Napa

Finding Ways to Reduce Tax Liabilities in Estate Plans

If you’re considering ways to protect your estate from taxes so your family can keep as much money as possible, it’s time to speak with an estate planning lawyer about your legal options.. One strategy is to form a family limited partnership (FLP). This is an estate planning tool that involves turning a business into a partnership run by family. The result is that you can protect your assets, pay less in taxes, and keep more of your money within the family. 

If you’re interested in including a family business in your estate plan for asset protection, contact Celaya Law to discuss whether a family limited partnership is right for you. Our lawyers have been helping Napa Valley residents and business owners with asset protection for years, and we want the chance to do the same for you. Call our law firm to schedule an initial consultation with a caring attorney to discuss your estate plan.

How Does a Family Limited Partnership Work?

A family limited partnership is a business entity owned by family members. With this legal structure, there are two types of partners involved in the business. One is a general partner and the other is a limited partner. Before starting a limited partnership, you and your family must decide who gets which role in the business. 

General partners have full control of the assets they transfer into the business, which means they also have more liability. By contrast, limited partners don’t have a voice in how the business is run, but they’re protected by limited liability. Most families that choose this type of limited liability company opt for the parents or grandparents to be the general partners, while children are usually the limited partners. This way, the next generation in the family can gradually learn how to operate the business while limiting their liability. 

If you currently run a business or have an idea for one, creating an FLP can be an effective way to safeguard your assets. This is because once you have a family limited partnership, you can transfer assets to it. Since the family business now owns your assets, you’ll save money on taxes and can rest assured they won’t be taken if the limited partners are targeted by creditors. If this estate planning strategy appeals to you, contact Celaya Law to talk to a knowledgeable lawyer.

What Are the Benefits of a Family Limited Partnership?

One of the main reasons to set up a family limited partnership is to save on taxes. When you transfer your assets to this business entity, you decrease the taxable estate, which means you’ll pay less in income taxes now and your beneficiaries will pay less in estate taxes when you pass away.

In addition, once your assets are in the FLP, you can give your loved ones gifts of ownership over the years. Due to the annual gift tax exclusion, you won’t owe taxes on your gift transfers, so you can keep or pass down more of your money. If you’re strategic about this, you can gradually transfer most of your assets to your children or other business partners while minimizing your taxes. 

Another benefit of a family limited partnership is the protection from claims against the limited partners. When the FLP owns the assets, a creditor or individual who brings a lawsuit against a limited partner won’t have access to them. So, whether your goal is saving on taxes or protecting assets, you should talk to a lawyer about this estate planning tool. 

Are You a Good Candidate for This Option?

If you own a family business or want to use your high net worth to start one, an FLP may be ideal. However, it’s not the right option for everyone. First, it can take time to set up and may take additional effort to ensure it’s managed correctly. The IRS may scrutinize your FLP to make sure it’s for a legitimate family-run business, which is why it’s important to get the help of a skilled lawyer when creating it. 

In addition, though you will save a lot on estate taxes, you could face capital gains taxes after selling assets. You’ll need to talk to a tax professional about the tax implications of any actions you take regarding the FLP. 

Also, while an FLP can protect limited partners from losing assets to creditors, the general partners are still at risk of losing the assets in this business entity. Finally, since all owners involved in a family limited partnership must be at least 18, this isn’t usually a good option for transferring assets to minor children. You would likely need to consider a trust instead. A lawyer from our Napa Valley law firm can counsel you on this decision, so contact us to discuss your estate planning options. 

Should You Hire Family Limited Partnerships Attorneys in Napa, California?

When you have a family business that’s important to you and your loved ones, you should consider some legal strategies to protect it when you or your spouse are no longer here. Creating a family limited partnership can ensure your children are provided for when you’re gone, since it can reduce the tax burden on your estate while allowing you to remain in control of your assets during your lifetime. 

When you come to our law firm for estate planning advice, a knowledgeable attorney can determine if this is the right strategy for your estate. We can also look into other ways to protect your company and your personal assets, such as different types of trusts, insurance policies, and more. If you’re ready to discuss how a family limited partnership could benefit you, contact our Napa Valley law office at 707-754-0977.