Family Limited Partnerships for High-Net-Worth Families
When it comes to safeguarding your wealth for future generations, few strategies are as effective and flexible as a family limited partnership (FLP). Designed to protect family assets, reduce potential estate taxes, and maintain a degree of control over how your wealth is managed, an FLP can be a cornerstone in an effective estate plan. For high-net-worth individuals—especially those aged 45 and above—understanding how an FLP works and comparing it to other tools like trusts is crucial for making the best decisions about your financial legacy.
What Is a Family Limited Partnership?
A family limited partnership is a legal entity created to hold and manage family-owned assets, such as real estate, investment portfolios, or closely held businesses. It includes two types of partners:
General Partners (GPs): These individuals manage the partnership’s day-to-day operations and make key decisions about the assets.
Limited Partners (LPs): These family members hold ownership interests but have limited or no control over daily operations.
This structure allows the senior generation—often parents—to retain control over how the assets are managed while gradually transferring ownership to the younger generation. Because limited partner shares can be gifted at potentially discounted values, FLPs may offer substantial estate and gift tax advantages.
Key Benefits of Family Limited Partnerships
Retained Control
General partners maintain control over critical decisions, ensuring that assets are managed in a way that aligns with your long-term objectives.
Tax-Efficient Wealth Transfer
By transferring limited partner shares over time, you may reduce your estate’s taxable value. This gradual transfer can help minimize gift and estate taxes, making it a popular option for high-net-worth families.Asset Protection
Limited partners often have some protection from lawsuits and creditors, as their personal liability is generally limited to their investment in the FLP. However, keep in mind that general partners could still be exposed to liabilities.Legacy and Education
An FLP can serve as a teaching tool, helping younger family members learn how to manage and preserve wealth responsibly.
Family Limited Partnership vs. Trust: Understanding the Difference
Although both family limited partnerships and trusts are valuable estate planning tools, they offer different advantages and levels of control.
Ownership and Management
FLP: General partners retain control, while limited partners have an ownership stake but no authority over daily operations.
Trust: A trustee (who may be a family member or a professional) manages assets on behalf of beneficiaries, following instructions outlined by the grantor (the person who establishes the trust).
Control and Flexibility
FLP: Ideal for families who wish to keep decision-making power in the hands of senior members while gradually transferring wealth.
Trust: Can be set up to direct when and how beneficiaries receive assets, often offering more detailed instructions for distribution.
Tax Advantages
FLP: May provide opportunities for discounting the value of partnership shares, reducing estate and gift taxes.
Trust: Irrevocable trusts, in particular, can shield assets from certain taxes and creditors, while revocable trusts allow more flexibility but fewer tax benefits.
Asset Protection
FLP: Offers partial protection for limited partners, but general partners remain liable for partnership obligations.
Trust: In many cases, a properly structured irrevocable trust can provide stronger asset protection by placing assets beyond the direct reach of creditors.
Estate Planning Goals
FLP: Focuses on shared ownership and transferring business or investment interests to the next generation.
Trust: Offers more control over how and when assets are passed on, helping ensure your wealth is used according to your wishes.
Is a Family Limited Partnership Right for You?
Deciding whether to use an FLP depends on your goals and the types of assets you own. Families with significant real estate holdings or family businesses often find FLPs especially helpful for gradually transferring ownership while keeping management within the senior generation. The structure also allows for potential tax benefits, including discounted valuations when gifting shares to heirs.
However, if your primary concerns include maintaining privacy, avoiding probate, or specifying detailed instructions for how your beneficiaries should use their inheritance, a trust may be more suitable. Trusts can also offer stronger creditor protection and may be easier for non-business assets, like investment accounts or personal property.
In many cases, high-net-worth families employ both FLPs and trusts as part of a comprehensive estate plan. Each tool has its strengths, and a tailored approach can ensure you preserve wealth most efficiently and protectively possible.
How Falcon Wealth Planning Can Help
At Falcon Wealth Planning, we understand that every family’s situation is unique. Our experienced team can:
Evaluate your current assets and estate planning goals.
Determine whether a family limited partnership, trust, or both would align best with your needs.
Assist with the legal and financial aspects of setting up an FLP or trust.
Help you manage and transfer wealth effectively to the next generation.
With our client-focused approach, we strive to simplify complex estate planning concepts and ensure you feel confident in every decision. We recognize the importance of flexibility, control, and long-term financial security—especially for individuals and families with substantial assets.
Take the Next Step
If you’re ready to explore the benefits of family limited partnerships or want to refine your overall estate plan, we invite you to schedule a consultation with Falcon Wealth Planning. Our team will work closely with you to design a strategy that protects your legacy while meeting your family’s specific needs and goals.
*The content in this blog is for general informational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Falcon Wealth Planning, Inc., a fee-only, true fiduciary, registered investment advisor, provides this information to give a broad understanding of financial concepts and strategies.