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Tom Meaglia, ChFC®, AEP®,

CLU®, CRPC®, MSFS

Chartered Financial Consultant

Investment Advisor Representative

Chartered Retirement Planning Counselor

CA Insurance Lic. #0567507

 

Meaglia Financial Consulting

2105 Foothill Blvd., #B140, La Verne, CA 91750

 

Toll Free: 800-386-3700

Bus:         909-593-6105

Cell:         818-681-8600

Fax:         909-593-6120

 

Email: tom@meagliafinancialconsulting.com

Website: www.meagliafinancialconsulting.com

September/October 2024

Preserve Wealth with an FLP

young couple deal contract real estate investment business agreement agent document signing meeting

A family limited partnership (FLP) is a business or holding company owned by two or more family members. It is designed to preserve a family’s wealth and pass it from one generation to another through tax-free transfers of assets, including cash, real estate or the family business.


Partnerships
An FLP consists of two types of partners: general partners and limited partners. General partners typically own the largest share of the business and have control over asset management and decision-making. They may take a management fee from the profits. Limited partners contribute capital and have limited or no roles in daily business operations.


How to Create an FLP
Creating an FLP involves several steps:
  • Choosing the family members (partners) who will manage and own FLP assets;

  • Drafting a partnership agreement specifying each partner’s responsibilities and ownership percentages;

  • Contributing assets, including investments, real estate or business interests. The FLP then becomes the owner of the assets;

  • Valuing the assets for tax purposes and establishing each partner’s initial interest by employing an independent appraiser;

  • Filing paperwork with the state where the FLP was established; and

  • Maintaining compliance by adhering to terms of the partnership agreement and following all legal requirements.


FLP Advantages
An FLP can be an effective tool for transferring wealth to future generations, while reducing or eliminating gift and estate taxes. Individuals can gift FLP interests tax free each year, up to the annual gift-tax exclusion — currently, $18,000 or $36,000 for a married couple — to as many individuals as they choose. Assets in the FLP also gain some protection from creditors and lawsuits.


FLP Disadvantages
FLPs are costly to set up and maintain. Expenses include legal and administrative fees, maintenance costs, and the hiring of professionals to ensure compliance with complex regulations. Family disagreements over management, asset distribution and decisionmaking can jeopardize wealth and relationships. An FLP’s limited liquidity can create problems during financial emergencies or when family members have different financial needs. There is also the risk of members incurring debt that impacts other FLP members.


Tax laws governing FLPs are complex. Families should consult a qualified tax professional, estate planning attorney and financial professional before proceeding.


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Thomas Meaglia is an Investment Adviser Representative of Coppell Advisory Solutions LLC, dba, Fusion Capital Management, a registered investment adviser that only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting.
Insurance and annuity products are not sold through Fusion Capital Management. Fusion does not endorse any annuity or insurance product, nor does it guarantee any insurance or annuity performance. Annuity and life insurance guarantees are subject to the claims-paying ability of the issuing insurance company. If you withdraw money from or surrender your contract within a certain time after investing, the insurance company may assess a surrender charge. Withdrawals may be subject to tax penalties and income taxes. Persons selling annuities and other insurance products receive compensation for these transactions. These commissions are separate and distinct from Fusion's investment advisory fees.
Meaglia Financial Consulting and LTM Marketing Specialists LLC are unrelated companies. This publication was prepared for the publication’s provider by LTM Client Marketing, an unrelated third party. Articles are not written or produced by the named representative.

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