Family Limited Partnership
A partnership created among family members to hold and manage family assets (like real estate or a business). It can reduce estate and gift taxes through valuation discounts and allows older family members to transfer wealth gradually.
Legal Definition
A limited partnership formed among family members in which senior family members serve as general partners and junior members hold limited partnership interests, used for asset management, creditor protection, and transfer tax reduction through valuation discounts for lack of control and marketability.
Practical Example
Mom and Dad create a family limited partnership and transfer $10 million in rental properties into it. They gift limited partnership interests to their children at a 30% discount (because limited partners lack control and marketability), effectively transferring $10 million for only $7 million in gift tax value.