KY Family Limited Partnerships Lawyers KY LLC Attorney
The best way to take care of your assets is to have a plan in place before the need actually arises.
Think of asset protection as a sort of extensive financial insurance. A well-drafted plan can shelter your assets, leaving you with less to lose to future creditors, divorce, lawsuits, and judgments. Planning needs vary, and should take into account your financial situation, assets, risks, and goals. Family limited partnerships (FLP) and limited liability companies (LLC) are both commonly used instruments for estate/asset planning.
When you’re ready to discuss developing an asset protection plan for you and your family, the Lexington, Kentucky LLC lawyers at Bunch & Brock are here for you. We understand that everyone has different goals and we create personalized, comprehensive plans tailored to each client’s unique circumstances. We work hard to ensure that the finished product offers the peace of mind that you’ve done right by yourself and your loved ones. Put our experience to work for you. Contact us today by calling 859-254-5522 or filling out this online form.
Family Limited Partnerships (FLP)
A family limited partnership is an investment-producing entity that exists between family members who are actively involved in a business. The partnership divides rights to income, appreciation, and control among the family members, who are general and limited partners. Commonly, general and limited partnership interests are generated in the business with the parents maintaining control as general partners while gifting the children limited partnership interests so they can share in the ownership. An FLP should be structured with both the present and future owners in mind, because it is a highly effective tool for passing property from generation to generation without having to go through probate.
The partnership is a tax-neutral entity. Instead, the owners of a partnership report the partnership’s income and deductions on their personal tax return, in proportion to their interests. The parents transfer the value of the asset to their children, removing it from their estates for federal estate tax purposes. The children as limited partners cannot control investments or distributions, so they may be eligible for valuation discounts at the time of transfer. Transfers of limited partnership interests are also eligible for the annual gift tax exclusion, which can be taken maximum advantage of where the partnership interests are given in increments over time. Including children as partners and sharing partnership income with them may reduce total family taxes, resulting in substantial income tax savings.
Limited Liability Companies (LLC)
A limited liability company is a non-corporate business entity that can be structured to give the members (owners) personal liability protection for the debts of the business while allowing them to participate in the business’s management and control. The members’ personal assets are sheltered from the business’s liability and vice versa. For example, the LLC shields the members from personal liability if the business is sued. If a lawsuit is filed against a member, the LLC’s assets are protected from being seized to satisfy the judgment.
To form an LLC there are certain legal procedures that must be followed. The most important is registration by filing articles of organization with the Kentucky Secretary of State. The articles of organization must include:
- Name of the company
- Mailing address of the company’s principal office
- Name of company’s registered agent
- Street address of the company’s registered office
- The company’s management structure
- One or more organizer signatures
- Agent’s signature.
Several taxation options are available for an LLC, including treatment as a sole proprietorship, a corporation, or a partnership. Because LLCs can combine limited personal liability protection with favorable partnership tax classification, they are often preferred by real estate investors when used to own assets that create passive income. One of the ways an LLC can prove advantageous for estate planning purposes is when parents act as managers in a company that is majority-owned by non-managing children, but the operating agreement provides for those non-managers to become managers upon the parents’ incapacitation or death. This eliminates having to pay death taxes while still transferring the assets and, as a bonus, the duration of the LLC can be perpetual.
Most people are under the impression that asset protection planning is for individuals with a high net worth. In fact, it can benefit anyone with something to lose. With over 35 years’ experience in our community, the Fayette County FLP attorneys at Bunch & Brock are committed to providing each of our clients with a high level of personal service. We understand that each plan must be as unique as the person it serves, and we have worked hard to protect the best interests of hundreds of clients faced with the questions that concern you now. We will guide, inform, and educate you on the benefits and disadvantages of all of the available options so that you can be confident in the decisions that are made. Whether you’re planning for your own future or for the future of a loved one, we can help. To schedule an initial consultation, please call 859-254-5522 or fill out this online form.