FAMILY LIMITED PARTNERSHIP FLP

A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.

An FLP is different from a conventional trust, as family members actually own a share in a business. Shares can be gifted to family members over years, thus taking advantage of gift tax exemptions on an annual basis. The assets held in an FLP impact the level of estate tax savings that can be realized by using an FLP. In general, the more illiquid and complex the asset mix, the more difficult the FLP is to evaluate, and the larger the potential for estate tax savings.