--- title: Family Limited Partnerships description: Family Limited Partnerships, hereinafter “FLP’ are a special type of limited partnership, that can be used in conjunction with an estate plan, an asset protection plan, as well as a financial plan. image: https://www.richardcolombik.com/hubfs/Double%20exposure%20of%20success%20businessman%20using%20digital%20tablet%20with%20london%20building%20and%20social%20media%20diagram.jpeg --- [![RMC-logo-svg](https://www.richardcolombik.com/hubfs/RMC-logo-svg.svg)](https://www.richardcolombik.com) - [Welcome](https://www.richardcolombik.com) - [Services](https://www.richardcolombik.com/services) - [IRS](https://www.richardcolombik.com/services/irs) - [Tax Reduction Planning Services](https://www.richardcolombik.com/services/tax-reduction-planning-services) - [Business Entity Structuring and Transactions](https://www.richardcolombik.com/services/business-entity-structuring-and-transactions) - [Asset Protection](https://www.richardcolombik.com/services/asset-protection) - [Real Estate](https://www.richardcolombik.com/services/real-estate) - [Estate Planning](https://www.richardcolombik.com/services/estate-planning) - [Retirement Planning](https://www.richardcolombik.com/services/retiremen-plans) - [Company](https://www.richardcolombik.com/company) - [Insights](https://www.richardcolombik.com/articles) - [Contact](https://www.richardcolombik.com/contact) Search *Search* Search *Search* - [Welcome](https://www.richardcolombik.com) - [Services *Toggle Menu*](https://www.richardcolombik.com/services) - [IRS](https://www.richardcolombik.com/services/irs) - [Tax Reduction Planning Services](https://www.richardcolombik.com/services/tax-reduction-planning-services) - [Business Entity Structuring and Transactions](https://www.richardcolombik.com/services/business-entity-structuring-and-transactions) - [Asset Protection](https://www.richardcolombik.com/services/asset-protection) - [Real Estate](https://www.richardcolombik.com/services/real-estate) - [Estate Planning](https://www.richardcolombik.com/services/estate-planning) - [Retirement Planning](https://www.richardcolombik.com/services/retiremen-plans) - [Company](https://www.richardcolombik.com/company) - [Insights](https://www.richardcolombik.com/articles) - [Contact](https://www.richardcolombik.com/contact) [*Facebook*](https://www.facebook.com/people/Richard-M-Colombik-Associates-PC/100063841561075/) [*LinkedIn*](https://www.linkedin.com/in/richard-colombik-9717b56) [*Twitter*](https://twitter.com/rcolombik) 3 min read # Family Limited Partnerships [![Picture of Richard M. Colombik](https://www.richardcolombik.com/hubfs/richard_colombik.jfif) Richard M. Colombik](https://www.richardcolombik.com/articles/author/richard-m-colombik) : May 4, 2022 9:12:47 PM [Corporate & LLC](https://www.richardcolombik.com/articles/tag/corporate-llc) ![Featured Image](https://www.richardcolombik.com/hubfs/Double%20exposure%20of%20success%20businessman%20using%20digital%20tablet%20with%20london%20building%20and%20social%20media%20diagram.jpeg) Family Limited Partnerships, hereinafter “FLP’ are a special type of limited partnership, that can be used in conjunction with an estate plan, an asset protection plan, as well as a financial plan. What is this wondrous vehicle and how does it work? The purpose of this article will be to address these concerns.   #### Family Limited Partnership   A FLP, is a limited partnership, composed of family members. A limited partnership is filed pursuant to the Revised Uniform Limited Partnership Act. By executing and filing a certificate of limited partnership, a limited partnership, under Illinois law, comes into being. A certificate of limited partnership has nine enumerated requisites pursuant to 805 ILC2 210/201 including: 1. The limited partnership’s name; 2. The purpose for which the partnership is formed; 3. The address of the office at which the records required by statute are kept and the registered office’s address; 4. Name and address of each general partner; and 5. The value of property contributed to or agreed to be contributed The essence of a limited partnership is the creation of two classes of partners, the general partner, the one that control the entity, and the limited partners, the ones who have no voice in any management decisions. Therefore, the general partner runs the show, and the limited partner sits by the sidelines. These are a variant of the misguided entities used with tax shelter transactions. Parents or older family members, the ones with more assets, initially are general partners, as well as the majority limited partners. Children or younger generation family members would have very small interest initially as limited partners. They could annually be gifted additional limited partnership interests subject to the annual gift tax exclusion, currently $10,000.00 per person. Since all partners would be related, the term, FLP, is used to refer to this entity.   #### What Does It Do?   A limited partnership has three major advantages relating to estate planning and asset protection:     1. **Asset Protection** An additional aspect of a FLP is asset protection. In a properly structured limited partnership, a creditor, who obtains a judgment against any partner, may not attach partnership property. Instead, a creditor may obtain a “charging order” against the partnership interest. The charging order does not allow the creditor to attach partnership property, nor does it allow the creditor to become a partner, or to liquidate the interest, if the FLP is properly drafted. Instead the creditor obtains the profit or loss from the partnership interest it attaches to. 2. **What’s so great about this?** The answer is found in Revenue Ruling 77-137. In Revenue Ruling 77-137, the individual at issue obtained an assignment of a limited partnership interest. The IRS ruled that the assigned partner must report the distributive share of partnership items of income, gain, loss, deduction and credit attributable to the assigned interest just as if the person was a substituted limited partner. This was notwithstanding the fact that no money was distributed from the partnership, yet taxable income had to be included on the judgment creditor’s income tax return. Therefore, you could cause a judgment creditor to pay income tax on money they would not receive. This makes a charging order highly ineffective and quite costly. Therefore, the three elements as discussed above, valuation discounts, separation of ownership, combined with asset protection, makes a FLP an ideal vehicle to hold liquid assets, as well as other assets in your estate plan. Remember, a FLP, is only one tool to be used in conjunction with your overall estate plan, asset protection plan and financial plan. Richard M. Colombik, JD, CPA, is the principal in the law firm of Richard M. Colombik & Associates, P.C., and serves as chairman of the Federal Taxation Council. He is an elected representative in the Illinois State Bar Association Assembly, and also serves as liaison to the IRS district director for the Illinois State Bar Association. He can be reached at 630-250-5700. - [Tweet](https://twitter.com/share) #### [Usage Of C Corporations Require Adherence to the Form and Substance](https://www.richardcolombik.com/articles/usage-of-c-corporations-require-adherence-to-the-form-and-substance) ![Picture of Richard M. Colombik](https://www.richardcolombik.com/hubfs/richard_colombik.jfif) [Richard M. Colombik](https://www.richardcolombik.com/articles/author/richard-m-colombik) : Jun 23, 2022 12:37:23 PM For all clients who use a multiple corporation set up, they are aware that they must submit invoices for services performed. The services must be... [Corporate & LLC](https://www.richardcolombik.com/articles/tag/corporate-llc) [Read More](https://www.richardcolombik.com/articles/usage-of-c-corporations-require-adherence-to-the-form-and-substance) #### [Prime Rate Funds](https://www.richardcolombik.com/articles/prime-rate-funds) ![Picture of Richard M. Colombik](https://www.richardcolombik.com/hubfs/richard_colombik.jfif) [Richard M. Colombik](https://www.richardcolombik.com/articles/author/richard-m-colombik) : May 4, 2022 9:29:43 PM Do your bonds have you feeling shaky since interest rates have no where to go but up? [Investments](https://www.richardcolombik.com/articles/tag/investments) [Read More](https://www.richardcolombik.com/articles/prime-rate-funds) #### [Irrevocable Insurance](https://www.richardcolombik.com/articles/irrevocable-insurance) ![Picture of Richard M. Colombik](https://www.richardcolombik.com/hubfs/richard_colombik.jfif) [Richard M. Colombik](https://www.richardcolombik.com/articles/author/richard-m-colombik) : May 4, 2022 9:17:08 PM The Revocable Living Trust is a trendy topic for seminar these days. When you strip away all the hype, however, the Revocable Living Trust is merely... [Estate Planning](https://www.richardcolombik.com/articles/tag/estate-planning) [Read More](https://www.richardcolombik.com/articles/irrevocable-insurance) ##### Contact Information **Richard M. Colombik & Associates, P.C.** Award-winning law firm   1701 E. Woodfield Rd. Suite #327, Schaumburg, IL 60173 Phone: [(630) 250-5700](tel:(630)%20250-5700) Fax: [(847)-908-8136](fax:8479088136) Email: [rcolombik@colombik.com](mailto:rcolombik@colombik.com) ##### Services - [IRS](https://www.richardcolombik.com/services/irs) - [Tax Reduction Planning Services](https://www.richardcolombik.com/services/tax-reduction-planning-services) - [Business Entity Structuring and Transactions](https://www.richardcolombik.com/services/business-entity-structuring-and-transactions) - [Asset Protection](https://www.richardcolombik.com/services/asset-protection) - [Real Estate](https://www.richardcolombik.com/services/real-estate) - [Estate Planning](https://www.richardcolombik.com/services/estate-planning) - [Retirement Planning](https://www.richardcolombik.com/services/retiremen-plans) [![RMC-logo-white-gold](https://www.richardcolombik.com/hubfs/branding/RMC-logo-white-gold.svg)](https://www.richardcolombik.com) - [Terms of Use](https://www.richardcolombik.com/terms-of-use) - [Privacy Policy](https://www.richardcolombik.com/privacy-policy) © 2026 Richard M. Colombik & Associates, P.C. All Rights Reserved. The information on this website is not legal or tax advice and does not create an attorney-client relationship. [*Facebook*](https://www.facebook.com/people/Richard-M-Colombik-Associates-PC/100063841561075/)[*Twitter*](https://twitter.com/rcolombik)[*LinkedIn*](https://www.linkedin.com/in/richard-colombik-9717b56) *Return to Top*