They say that we live in a litigious society. There are always individuals out there that are poised to file lawsuits against people that they perceive as “deep pocket targets.” Clearly, asset protection is important to safeguard your own interests, and there are legacy planning implications as well.
Family Limited Partnerships
One legal structure that can be the ideal asset protection tool when certain circumstances exist is the family limited partnership (FLP). The best way to explain the usefulness of an FLP is through the utilization of a simple example.
For the purposes of this hypothetical scenario, we will assume that you are a real estate investor. Over the years, you have acquired two shopping centers and five different apartment buildings. A good bit of revenue is generated, so you could potentially be exposed to significant losses if you were ever sued.
People sometimes get injured on rental property, so as a landlord, you would be constantly exposed to situations like these. Without question, when you have five different large properties, there are surely going to be a lot of people coming and going at all times.
You certainly don’t want your personal assets to be in the cross hairs of an attorney representing someone that has been injured on your property. A family limited partnership can be the ideal solution under these circumstances.
If you were to establish a family limited partnership, you would be looked upon as the general partner. Members of your family that you choose to add would become limited partners. A Family limited partnership is not a democracy; the general partner is the only one that can take actions on behalf of the partnership.
Since you have five distinct properties, you could convey each of them into separate family limited partnerships. If someone was injured in one of your apartment buildings, that family limited partnership would be the only entity that could be sued.
The rest of the investment properties would be completely protected, and the personal property of the partners would be out of play as well. You could actually create additional family limited partnerships to hold some of your personal property if you choose to do so.
An additional layer of protection could be added by making sure that you have limited equity in each of the properties, so if one of them was to be targeted, there would not be much for the litigant to take.
It should be noted that the asset protection works in the reverse manner as well. If you or another partner is personally sued, the property in the partnerships would be out of reach.
Access Our Special Report
Our firm has developed an extensive library of special reports that cover many different important elder law and estate planning topics. One of them provides in-depth information about family limited partnerships. To obtain access, click this link: Report on Family Limited Partnerships.
Attend a Free Seminar
We are excited about a series of free seminars that we are offering over the upcoming weeks. You can come away with a much more thorough understanding of the estate planning process if you attend one of these sessions, and they are being offered on a complimentary basis.
Though there is no admission charge, we would ask that you register for the specific session that interests you in advance, because we need to know how many people to expect. You can visit our seminar schedule page to see the dates and obtain registration information.
Take Action Today!
If you are currently unprepared from an estate planning perspective, today is the day to put the procrastination behind you. We would be more than glad to get to know you, gain an understanding of your objectives and your family dynamic, and explain your options to you.
Ultimately, if you decide to go forward, we can help you create a custom crafted estate plan that is ideal for you and your loved ones. To set the wheels in motion, send us a message or give us a call at 802-879-7133.