Bob Parrish C PA. P.C.

Family Limited Partnerships

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Question or Topic

Can the person wishing to mitigate the risks to his or her assets be a controlling person in the new FLP?

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17. Family LP ~ USTC Approvals

18. Family Limited Partnership - When To Use

The Answer

I would think this creates a real danger to the entire intention of the person wishing to protect the assets.

If the controlling gp is the "at risk" person there would seem to be a problem.  The possibility that a creditor, a bankruptcy trustee or an adverse prevailing party could make a motion for a "charge order" or the bankruptcy trustee could move for an assignment.  In those instances, the opposing party would take control of the (or, step into the position of) the authority of the gp.

This would seem to be a real risk to the intention of protecting the assets within the FLP.

I think that there must be a provision for the person to do one of the following:

• Be willing to and actually give up controlling, and management thereof, all assets being or transferred to the FLP.  OR
• Have a different entity control the FLP - AND THIS IS A VERY REAL RISK TO MEETING THE INTENTION OF ASSET PROTECTION.

If the person transferring the assets cannot be a controlling authority in the FLP, who can "safely" be a controlling person without risking the partnership assets?

First let us look at a list of candidates.  The discussion of the risks involved with each will be covered later.

• The spouse of the transferor - problems
• A corporation - problems
• A trust - problems

Solutions are dependent upon facts & circumstances, law and the objectives.  These elements vary from one time to another, from one circumstance to another and from from person or entity to another

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