Understanding the Pros and Cons of a Family Limited Partnership

Understanding the Pros and Cons of a Family Limited Partnership

A family limited partnership (FLP) is a legal entity that allows family members to pool their assets and manage them jointly, while still retaining the benefits of limited liability. Estate planners and asset protectors often use these partnerships as a tool.

Advantages

One of the main advantages of an FLP is that it allows family members to share ownership of assets while still maintaining control over them. This can be particularly beneficial for families that have multiple generations involved in the management of their assets. For example, parents can establish an FLP to manage assets for eventual transfer to their children while retaining decision-making power over those assets.

Another advantage of an FLP is that it can provide a significant tax benefit. By establishing an FLP, family members transfer ownership of assets into the partnership, taxed as a partnership instead of individually. This can result in a significant reduction in taxes for the family.

Disadvantages

However, there are also some potential downsides to an FLP. One of the main concerns is that the partnership agreement may be too restrictive for some family members. For example, requiring a majority vote for all decisions can make it difficult for minority members to influence outcomes.

Another potential downside of an FLP is that it can be difficult to dissolve the partnership. Unlike corporations, which shareholders can dissolve through a vote, dissolving an FLP requires all partners’ agreement. This can make it difficult for family members to separate their assets if they decide they no longer want to be in the partnership.

Another concern is that the partnership agreement may be too restrictive for some family members. For example, if the agreement states that all decisions must be made by a majority vote, it could be difficult for a minority member to have their voice heard.

There are also some potential legal issues that may arise with an FLP. For example, a poorly drafted partnership agreement could face legal challenges, and a court could dissolve a partnership not operated according to its agreement.

Despite these potential downsides, an FLP can be a useful tool for families that want to manage their assets jointly while still retaining the benefits of limited liability. Consulting a legal professional is crucial to ensure proper drafting of the partnership agreement and adherence to it in managing the partnership.

In Conclusion

Overall, family limited partnership is a great way to manage family assets and pass it on to the next generation while also enjoying the tax benefits. However, it is important to keep in mind that it has certain downsides as well like restrictions on decision making and dissolution of partnership. It is always recommended to consult a legal professional before creating an FLP and ensure that the partnership agreement is drafted properly and the partnership is run in accordance with the agreement. Contact Brenden Kelley Law at 216-644-3359 to schedule a consultation.


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Explore our other Blog Posts for Business Owners: Navigating the Resources of Small Business Administration in the U.S., Business Formation and Operation Using Series LLC in Ohio and Entrepreneurial Operating System: Align Your Team for Success.

Additional Resource: The Corporate Finance Institute provides a comprehensive overview and analysis of Family Limited Partnerships, including their advantages, disadvantages, and how they operate. This resource is valuable for understanding the intricacies of FLPs, including tax savings in estate planning, asset protection, and the transfer of family wealth to future generations

Simplifying the Probate Process in Ohio: What You Need to Know

Simplifying the Probate Process in Ohio: What You Need to Know

Understanding the probate process in Ohio is crucial for managing and distributing a loved one’s estate effectively. It’s a key step in fulfilling the deceased’s wishes and adhering to legal requirements.

What is Probate?

Probate is the legal procedure of settling an estate after someone passes away. In Ohio, the probate court of the county where the deceased lived handles this process. The goal is to distribute the deceased’s assets either according to their will or, if absent, in line with state laws.

The Probate Process in Ohio: Key Steps

  1. Filing a Petition with the Probate Court: The executor or administrator files a petition to open the probate case, providing details about the deceased’s assets and heirs.
  2. Appointing an Executor or Administrator: The court appoints an executor (as named in the will) or an administrator (if there’s no will) to oversee the estate’s settlement.
  3. Notifying Heirs and Creditors: This person is also responsible for informing heirs and creditors about the probate case, typically through mailed notices.
  4. Gathering and Inventorying Assets: They must collect and list the deceased’s assets, including real estate, bank accounts, stocks, and personal items.
  5. Paying Debts and Taxes: The executor or administrator pays any outstanding debts and taxes, such as credit card balances, loans, and due taxes.
  6. Distributing Assets to Heirs: Finally, after clearing debts and taxes, they distribute the remaining assets according to the will or state law.

Duration and Complexities of Probate

The duration varies from several months to years, influenced by the estate’s complexity and the number of assets. Executors or administrators should maintain detailed records and collaborate closely with the probate court.

Can Probate be Avoided?

Not all assets require probate. Jointly owned property, life insurance policies, or retirement accounts with named beneficiaries often bypass probate. Ohio also offers a simplified process for small estates worth less than $35,000.

Role of Executors, Administrators, and Heirs

Understanding your role in the probate process is essential, whether you are an executor, administrator, heir, or beneficiary. If you’re looking to avoid probate or need guidance, contact Brenden Kelley Law at 216-644-3359.


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Explore our other Estate & Probate Law Blog Posts.

Additional Resource: The Ohio State Bar Association details the probate process, focusing on how it administers probate property and the responsibilities of the executor.