Why Summer Is the Perfect Time to Discuss Family Limited Partnerships (FLPs)

Summer often brings families together—whether it’s for vacations, milestone celebrations, or simply enjoying time at the lake house. For high-net-worth families, these gatherings can also be a rare opportunity to have meaningful conversations about long-term wealth, legacy, and how to keep assets protected across generations.

One of the most effective tools for doing just that? The Family Limited Partnership (FLP).

What Is an FLP?

An FLP is a legal entity that allows families to consolidate and manage assets, such as investment portfolios, real estate, or family businesses, under a single structure.

It typically involves:

• General Partners (GPs) – Often the parents or senior generation, retaining management control.
• Limited Partners (LPs) – Often children or trusts for their benefit, holding economic interests without decision-making authority.

Why FLPs Are a Powerful Strategy for UHNW Families

1. Preserve Control While Transferring Wealth
   Even after gifting partnership interests, general partners maintain control over investments, distributions, and strategic decisions.
2. Minimize Estate and Gift Taxes
   By consolidating assets under an FLP, families may be able to apply valuation discounts reflecting lack of control and lack of marketability when transferring interests to the next generation. The valuation discounts are case specific but are often 20-40%, allowing more wealth to pass within the current lifetime exemption limits.
3. Protect Assets
   LP interests are generally shielded from creditors and lawsuits, as creditors cannot force distributions or take control of the FLP, adding another layer of protection to family wealth. It is important that the formalities of the FLP are respected to ensure asset protection in most cases.
4. Centralize Wealth Management
   An FLP allows for coordinated investment strategies, tax reporting, and succession planning under one structure.
5. Encourage Multi-Generational Engagement
   Younger family members can learn investment philosophy and stewardship directly from the senior generation.

For an FLP to withstand IRS scrutiny, it should be established for a valid business purpose (e.g., centralizing investments, governance, or succession) and operated as a real partnership. Improper structure or administration can invite examination.

Summer is the perfect time to:

• Have the initial conversation with family members in a relaxed setting.
• Identify which assets—such as a family business, investment portfolio, or real estate holdings—could benefit from being transferred into an FLP.
• Begin the process before year-end schedules get crowded with tax planning, market moves, and legal deadlines.

Next Steps

If an FLP or LLC structure aligns with your goals, it is important to work with your estate planning attorney, CPA, and wealth advisor to:

• Form the entity with a valid business purpose to withstand IRS review.
• Coordinate professional valuations to justify discounts.
• Ensure ongoing compliance with formalities like annual meetings, separate accounting, and bank records.

Bottom line:
Summer is more than just a season for family memories. It’s an ideal time to make decisions that protect those memories for generations to come. By starting the conversation now, you can preserve current opportunities, reduce taxes, and keep control of your family’s wealth where it belongs.

Important Disclosures: This article is not intended to provide and you should not rely upon it for accounting, legal, tax, insurance or investment advice or recommendations. This article is intended to be educational in nature and to discuss limited aspects of very complex subject matters. This article is not a comprehensive or complete summary of all considerations regarding its subject. We recognize that every individual has different needs and the opinions expressed in this article may not be appropriate for everyone. Please consult with a Freestone client advisor, insurance provider, accountant, or lawyer regarding options specific to your needs.