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Asset Protection - Family Limited Partnerships from Orange County Asset Protection Lawyers

Asset Protection domestically with the use of family limited partnerships means not having creditors already knocking at your door or breathing down your neck. All is not lost if that is your situation as our Orange County asset protection lawyers have other methods and strategies for protecting your assets. In fact, there are other disadvantages to using family limited partnerships for your asset protection.

If you’re already being sued or you think you are about to be served with a lawsuit, it’s already too late to utilize a family limited partnership to protect your assets. A transfer of assets to a family limited partnership created for the purpose of protecting assets from existing creditors can be viewed by a court as a fraudulent conveyance or transfer.

Because of the possibility of a creditors bringing a suit against a family limited partnership on the basis of allegations there was a fraudulent conveyance or fraudulent transfer of assets, a family limited partnership should only be considered where there is no pending litigation. There should ideally be no claims the asset holder is aware of and the family limited partnership should be created only as part of a comprehensive estate plan which includes a trust and a will.

If an individual has a number of investment properties or businesses, a separate family limited partnership needs to be set up for each of them. The higher the risk involved with an asset (risk, being the likelihood of lawsuits) the more important it is to be segregated into its own family limited partnership.

A drawback of the Family limited partnership is that when the assets are eventually received by the children in the family, they will be at their original basis rather than at a stepped-up basis. If the children ever sell the assets, there will be capital gains tax on the increased value of those assets. But those children having inherited all their parents assets without the payment of any estate tax to the IRS should not complain.

Additionally, family limited partnerships are expensive. As well as the initial start up fee, annual taxes must be paid and annual tax returns filed. While offshore asset protection is even more expensive, our Orange County asset protection lawyers will tell you, offshore trusts and LLC’s are, in most situations, much safer.

Family limited partnerships should be looked at as a deterrent to creditors, not as a force field that can’t be broken. Just as in Star Trek, the Enterprise’s force field was always losing strength if not shutting down altogether, a family limited partnership’s protection can also break down.

In compliance with IRS requirements, we must advise you that any U.S. federal tax advice contained in this informational article concerning family limited partnerships and offshore asset protection is not intended by our Orange County asset protection lawyers to be used nor is it published in order for it to be used and you may not use it for the purpose of avoiding penalties or fines under the Internal Revenue Code. Asset protection advice is not intended to be used nor is it being published in order to promote, market or recommend any specific transaction, tax-related matter or estate planning tax scheme to any party.

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© 2011 R. Sebastian Gibson

Copyright © 2011 Sebastian Advertising Law Firm of Attorney R. Sebastian Gibson ~ Serving all of Southern California, the Palm Springs Desert Area, Riverside, the Inland Empire, San Bernardino, Los Angeles, San Diego, Orange County, Ventura, San Luis Obispo, the Central Coast & Santa Barbara from our law offices in Rancho Mirage, CA ~ Established 1984

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