Overview for Transferring Assets to a Family Limited Partnership

There is a distinction between what assets your limited partnership legally can own, and what assets it should own. Certain assets should not be titled to the limited partnership, although legally permissible. You must consider many things when you select which assets to transfer to your limited partnership. If the limited partnership has a specific business purpose, then the limited partnership should own only those assets necessary to fulfill it's business functions. For example, a limited partnership organized to develop real estate should not own unrelated assets, such as personal investments. Obviously, you wouldn't use a limited partnership with a number of unrelated partners to own your own assets. Here you would invest only in proportion to your other partners — usually enough cash or other assets to further the business or investment interests of the partnership.

Your limited partnership can protect all, or a significant share, of your wealth:

• Stocks, bonds and other investments
• Cash
• Antiques, art, and collectibles
• Vehicles
• Real estate
• Claims against others
• LLC memberships
• Intangible assets (copyrights, patents, etc.)
• Notes/mortgages or other obligations due to you
• C corporation shares
• Other limited partnership interests
• Beneficial interests in trusts

Any limited partnership should only own income-producing or appreciating assets, which should be the primary reason for setting up a limited partnership. It is important to note that under S corporation rules, the limited partnership cannot own S corporation shares, nor should it own annuities, because you may then lose their tax deferral status.

Your limited partnership also cannot own IRAs or other retirement accounts; however, your retirement account can invest its funds in your limited partnership, which will provide distinctive protection for your IRA funds.

Don't use a limited partnership to operate a business unless its general partners are LLCs or corporations due to the fact that the general partners would be liable for debts of the partnership. Use a corporation or limited liability company to operate a business.

Your home should never be titled to a limited partnership because your home is not an investment or business related asset and a court could court disregard the LP. Additionally, you lose two important tax benefits when you personally own a home—the mortgage interest deduction and the capital gains rollover. We frequently see some LP promoters recommending a home being titled to a limited partnership but we consider this to be extremely poor advice and have a number of alternatives (including a single member LLC, personal residence trust or equity stripping, to name a few) that are superior alternatives.

PROTECT YOUR ASSETS TODAY!