I have a UHNW client who is a partner in a professional industry rife with lawsuits. He has established a FLP for asset protection & to transfer wealth to his kids.
My concerns are:
- He and his wife are the GP's & have retained a large component of the LP. While this makes sense because the partnership is only 3 yrs old & they've been transferring what they can under the gift exclusion laws, if they were to pass today might the courts ignore the FLP for the component of the LP interests that are still in their name as they are also the GP's? Might they just ignore the FLP all together? Are there recent precedents for this occuring?
- He has only one FLP. He has his professional partnership interest along with his brokerage acct's, etc, in this one FLP. Even the bene for his pension plan & rollover IRA's is the FLP(I told him it makes much more sense to have the bene be a living person.) My concern is if there is a lawsuit, he may not be able to get to other liquid assets without having them be attached to the suit. At the same time he might have interest & capital gains taxes to pay. Would he benefit from separating the FLP for his professional partnership interest & his brokerage acct's?
- He has personal use property in his FLP including his home. Distribute it or lease it back to him?
- His primary goal is still retirement & he's not saved quite enough to continue his current lifestyle if he stopped. Is this an appropriate planning strategy for someone who may need the money for personal living expenses at some future date?
- He wants to deposit another sizeable chunk of money that is now in personal name into the FLP's name.
I need to get him to the estate planning atty I work with. I see some significant issues with what he's doing, but I only know enough to know I know nothing... Can anyone flesh these out for me?