The Family Limited Partnerships 

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Savvy Families Plan Ahead 5 Years, Because, It's Not What You Earn, But What You Keep!   The Biggest Advantage of the Family Limited Partnership is For The Asset Protection Benefits. However, The Estate Tax Reduction or Elimination is also a major benefit as well. Not to mention, the income spreading of income from yourselves to your limited partners who may be in a lower tax bracket as Well! Of course you can't forget the ability to disinherit the Government Liens For Long Term Hearth care, provided you do what the other Savvy Families do, and that is plan ahead 5 years before you need to use the benefits! When used correctly, the Family Limited Partnership gives you the asset protection you need, and when used with the Living Trust (To Avoid Probate & Retain Privacy) you have build a fortress around you and your family. Moreover, when used with other structures, including offshore, you may create further asset protections as well! Typically, we transfer all or most of your personal and business assets into this partnership. The family house, bank or brokerage accounts, and other real estate investments will be transferred into the partnership. In the event of a lawsuit or judgment, this technique is effective since generally your creditors will not be able to reach inside the partnership and seize any of these assets. Under California law, and the law of most other states, a creditor has no right to execute or levy on partnership assets with a judgment against one of the partners. This provision is contained in the California Revised Uniform Limited Partnership Act, which has been law since 1949. Under the proper circumstances, the remedy that a creditor can use is called a "charging order." If any cash is distributed to you by the partnership, the creditor can take that cash to satisfy the judgment. If no distributions are made to you, the creditor receives nothing. The partnership can sell assets and retain or re-invest the proceeds; if no money comes to you, there is nothing for the creditor to take. A creditor cannot take your interest in management and control of the partnership and cannot take any assets of the partnership. The specific arrangement, which we would recommend for you, will depend on your particular circumstances, the business you are in, and the type of assets, which you own. If you are engaged in any business, or if you own property, you should take the necessary steps to arrange your affairs to maximize the income tax, estate planning and lawsuit protection techniques currently available. A lot of money can be saved if your plan is properly implemented. The Genius Of Limited Partnerships: The Charging Order Explained! The personal creditor of a limited partner cannot touch partnership assets. His only remedy is to get a charging order against the limited partner's interest. The charging order has the following advantages. You will also discover that the charging order is a very undesirable asset for a creditor to hold: It is the only means a creditor has to a limited partner's interest in a limited partnership. It is only the right to income; a creditor cannot touch partnership assets. The creditor lacks vote or management over partnership affairs. A creditor does not have inspection and accounting rights of the partnership. The creditor cannot remove you as a general partner of the limited partnership. This means you can continue to control all the assets and take salaries, wages, loans, and other benefits. A partnership is not required to distribute profits to its partners, including assignees such as a judgment creditor. A judgment creditor is liable for income taxes upon profits of the partnership, including those profits not distributed to the partners. The Charging Order Is A Creation By Statute. This is the only means by which a creditor satisfies his/her judgment against a limited partner. The Uniform Limited Partnership Acts R.U.L.P.A. (1976), and the U.L.P.A. (1985), which has been accepted totally or in party by all states, provides in section 703 that an individual partner's judgment creditor can only go against his limited partnership interest by means of a charging order. The court may only "charge" the partnership interest of the partner for the benefit of his judgment creditor. A charging order is defined in Am.Jur.2d, Partnerships Sec. 391: A court, on application by any judgment creditor of a partner, may charge the partnership interest of the partner with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the partnership interest. A partner is not deprived of any exemption laws applicable to his partnership interest. "Safe Harbor" Activities For Limited Partners To Avoid Personal Liability! Section 303(b)(3) of the 1976 version of the U.L.P.A. list activities that a limited partner can do without being deemed as having participated in the control of the business within the provisions of the Act. These "safe harbor" activities include: Being an agent, employee, or contractor for the limited partnership; Consulting with the advising a general partner with respect to the business of the limited partnership; Approving or disapproving of an amendment to the partnership agreement; or Voting on specified matters. Sec. 302 of the Act, subject to the above provisions, also states that the partnership agreement may grant to all limited partners, or to a specified group thereof, the right to vote on a per capita or other basis upon any matter. The 1985 U.L.P.A. adds to the "safe harbor" list of section 303(b)(3) of the 1976 Act. The 1985 Act expands the specified matters on which a limited partner can vote. In addition, the following acts are added to those allowed in the 1976 Act: 1. Being an officer, director, or shareholder of a general partner that is a corporation; 2. Guaranteeing or assuming one or more specific obligations of the limited partnership; 3. Taking any action required or permitted by law to bring or pursue a derivative action in the right of the limited partnership; 4. Requesting or attending a meeting of partners; 5. Winding up the partnership pursuant to section 803. A limited partner should be careful to follow the principles outlined or face the possibility of being personally liable for all partnership debts. Remember, that you want to have a separate Family Limited Partnership for your Safe Assets (Cash, Stocks, Bonds, etc.) and your dangerous Assets: (Real Estate, Autos, Boats, etc). In Other Words, Don't put all of your Assets (Eggs) In One Basket!   And Remember, Savvy Families Plan Ahead 5 Years, Because, It's Not What You Earn, But What You Keep, And You can Even Disinherit The Government!