Family Limited Partnerships Attorney

At Dilendorf Law Firm, we help families protect their assets, reduce taxes, and plan for the future using proven legal strategies.

In 2025, many high-net-worth families are turning to Family Limited Partnerships (FLPs) to manage wealth, retain control over key assets, and plan for a smooth transfer to the next generation.

An FLP allows you to place assets—such as real estate, investments, or a family business—into a partnership where you remain in control as the general partner.

At the same time, you can transfer value to your children or other family members as limited partners, often with significant tax advantages and asset protection benefits.

Our team works with each client to create a personalized plan that meets their family’s goals, protects their legacy, and ensures legal and tax compliance every step of the way.

What Is a Family Limited Partnership (FLP) and Why Use One?

A Family Limited Partnership (FLP) is a legal entity formed among family members to manage, protect, and transfer family assets. It consists of two classes of partners:

• General Partner(s) – typically parents or older generation members who retain full control over the partnership’s operations and decisions.
• Limited Partner(s) – usually children or other family members who hold ownership interests but have no control over management.

The FLP structure allows families to consolidate assets—such as real estate, closely held businesses, and investment portfolios—under centralized management, while strategically transferring ownership interests to the next generation over time.

Key Benefits of Using an FLP:

• Asset Protection: Assets held in the FLP are generally shielded from the personal creditors of limited partners, offering protection in the event of lawsuits, divorces, or financial disputes.
• Tax Efficiency: By transferring limited partnership interests at discounted values (due to lack of control and marketability), families can significantly reduce gift and estate tax exposure.
• Centralized Control: The general partner retains full decision-making authority, even as ownership is transferred, ensuring continuity and strategic oversight.
• Succession Planning: FLPs provide a structured method to transfer wealth or a family business to heirs while minimizing disruption and preserving long-term family control.
• Family Governance: The FLP structure promotes shared financial goals, encourages communication, and fosters long-term stewardship of family assets.

At Dilendorf Law Firm, we help clients structure FLPs tailored to their family’s unique needs—ensuring legal compliance, tax efficiency, and long-term protection of family wealth.

How a Family Limited Partnership Works

Setting up a Family Limited Partnership involves a series of strategic steps designed to protect and transfer family wealth efficiently:

1. Form the Partnership

Create the FLP with the help of legal counsel, including a detailed partnership agreement that outlines management authority, ownership interests, and operational rules.

2. Transfer Assets into the FLP

Contribute assets—such as real estate, business holdings, or investment accounts—to the partnership. These assets become legally owned by the FLP.

3. Retain Control as General Partner

As general partner, you maintain full control over how the FLP operates, including investment decisions, distributions, and overall asset management.

4. Gift Limited Partnership Interests

Gradually transfer limited partnership interests to children or other family members. These gifts may qualify for valuation discounts, helping reduce estate and gift tax exposure.

5. Manage and Maintain the FLP

Continue managing the FLP as a formal business entity. This includes keeping accurate records, filing necessary documents, and complying with legal and tax requirements.

What Types of Assets Work Best in an FLP?

Choosing the right assets is critical to the success of an FLP. The most effective assets for transfer into the partnership include:

• Real Estate – Rental properties, commercial buildings, or family-owned land
• Family Businesses – Ownership interests in privately held companies or LLCs
• Investment Portfolios – Marketable securities such as stocks, bonds, and mutual funds
• Intellectual Property – Royalties, trademarks, or patents that generate income

Note: Personal-use assets like your primary residence or vehicles should generally be kept outside of the FLP. These assets may not qualify for the same protections and can create tax and administrative issues.

We guide families through every step of FLP formation—from selecting the right assets to drafting compliant agreements—to ensure long-term control, protection, and peace of mind.

Tax Planning and Asset Protection with FLPs

A well-structured Family Limited Partnership (FLP) offers two powerful advantages for high-net-worth families: significant tax savings and protection of assets from outside threats.

Tax Planning and Valuation Discounts

One of the most valuable features of an FLP is the ability to transfer wealth while minimizing gift and estate tax liability.

This is achieved through valuation discounts applied to limited partnership interests gifted to family members.

Common Valuation Discounts:

• Lack of Control Discount

Limited partners have no authority to manage the FLP, reducing the market value of their ownership interests.

• Lack of Marketability Discount

Because FLP interests are not easily sold or traded, they are considered less liquid and therefore less valuable in the eyes of the IRS.

These discounts can reduce the taxable value of transferred interests by 20–40% or more, allowing you to pass more wealth to the next generation while staying within gift tax exemptions.

Important: To secure these benefits and withstand IRS scrutiny, it’s critical to work with experienced legal and valuation professionals who understand how to structure and document the FLP properly.

Asset Protection Features

FLPs also serve as a protective shield around family assets, especially for limited partners.

How FLPs Provide Asset Protection:

• Creditor Protection for Limited Partners

Assets held in the FLP are generally protected from claims by the personal creditors of limited partners.

A creditor may only receive a “charging order”—a right to distributions, if any—without gaining control of the assets.

• Preserving Family Wealth from External Risks

An FLP can help safeguard assets during divorces, lawsuits, or business disputes involving family members.

Structuring Matters:

For these protections to hold, the FLP must be properly formed, operated as a legitimate business entity, and respected as separate from personal finances.

Courts may disregard the FLP structure if it is poorly maintained or used solely to avoid liabilities.

Contact Us

If you’re considering a Family Limited Partnership as part of your estate or asset protection strategy, our team is here to help. Contact us at (212) 457-9797 or email us at info@dilendorf.com.

At Dilendorf Law Firm, we provide tailored legal solutions for high-net-worth individuals and families seeking to preserve wealth, maintain control, and plan for future generations.