Limited Partnerships are frequently used by family members or business associates to facilitate transfers of assets to others. Ownership of the partnership is broken into two classes of partners – general and limited. Limited Partnerships are an excellent tool that empowers one to maintain control over assets while at the same time offering flexibility needed to devise and implement a sound estate planning strategy that can deal simultaneously with a multitude of business and family issues.
Just a few benefits of Limited Partnerships include:
1. Liability Protection – An important aspect of limited partnerships is that only general partners, not limited partners, have any say in the management of the partnership. This means the general partner holds control, and therefore the liability for the partnership’s business dealings. Limited Partnerships offer important asset protection planning opportunities for those seeking to protect their personal assets.
2. Tax Benefits – A Limited Partnership provides significant opportunities to reduce your estate taxes. Many partnerships are created principally because the partners receive significant accounting discounts in the value of property transferred to the partnership. The less control a limited partner has in the partnership, the greater the valuation discount given.
3. Special Allocation – Subject to certain restrictions, the members of a Limited Partnership can allocate income and deductions among the general and limited partners in any agreed upon way. This ability to allocate income to individual partners permits a family to distribute partnership income to lower tax bracket members.
Of course, by itself a Limited Partnership is not a complete estate plan. It works best in conjunction with your Revocable Living Trust and other planning documents to make sure that your estate planning desires are completely fulfilled.
Have you benefited from a Limited Partnership? What advice, if any, can you offer our readers?