Planning to Pass the Baton: Family Wealth Transfers


If you have accumulated a substantial investment portfolio, or you own a successful business, there may come a time when you start planning to transfer ownership of the investments, or business, to younger generations of your family.

Many investors and business owners who wish to transfer family investments or a family business to younger generations do so through the formation of a family limited partnership (FLP) or similar entity. As the name suggests, an FLP is typically a partnership that consists of family members. When an FLP is formed, senior members of the family transfer their investments or business to the FLP, and receive a majority ownership interest in the FLP. Younger generations may also contribute property, such as cash, to the FLP, and receive a minority ownership interest. Over a period of years, the senior family members may transfer to junior family members incremental ownership interests in the FLP. Eventually, through annual or other periodic transfers to junior family members, ownership of the investments or business is transferred to the junior members. The annual or periodic transfers can be in the form of gifts, sales, or a combination of both.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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