Move Assets Downstream
While Keeping Control.
FLPs and related structures can shift future growth to the next generation while retaining centralized control and leveraging valuation discounts.
Why This Strategy Exists
Every major tax strategy is just the government's way of paying you to behave in a certain way—provide housing, hire people, save for retirement, or structure your business cleanly.
Family Limited Partnership is designed for situations like yours—high income, real dollars at stake, and enough complexity that a generic tax return won't cut it.
The Risk Of DIY
This strategy gets thrown around online as a magic bullet. The reality: the IRS is very specific about who qualifies, what documentation is needed, and how it must be reported.
Most of the messes we clean up come from half-implemented versions—no logs, no elections, no support—and big deductions that fall apart under scrutiny.
The Taxstra Approach
We don't treat this as a party trick. We treat it as an engineering project: understand your situation, model the numbers, then build a checklist so every requirement is met intentionally.
That includes time logs, elections, entity structure, coordination with attorneys or cost segregation firms when needed, and clear expectations for how the strategy evolves over time.
The Core Rules You Can't Ignore
Every strategy has a handful of non-negotiables. Get these right, and you're usually fine. Miss them, and no amount of clever structuring will save the deduction.
Eligibility
Who can actually use FLP Strategy—and who should not try. We map your income mix, entities, and long-term goals before we ever recommend it.
Key Tests
Hour thresholds, income limits, material participation tests, or dollar caps. We translate legalese into plain-English checklists specific to this strategy.
Documentation
What needs to be logged, signed, or saved: calendars, receipts, minutes, elections, appraisals, or engineering reports—whatever the IRS expects to see later for FLP Strategy.
The Technical Deep Dive
A Family Limited Partnership (FLP) is a holding company owned by two or more family members. It allows you to shift income to lower-bracket members and transfer wealth at a discount.
The "discount" comes from the fact that a minority interest in a private partnership is worth less than the underlying assets because it lacks control and marketability. This can reduce gift/estate tax value by 20-40%.
Pro TipYou must have a legitimate non-tax business purpose (e.g., centralized asset management), or the IRS may disregard the entity.
Who This Is NOT For
The Personal Piggybank
Commingling funds is the #1 way to lose FLP protection. You cannot use FLP cash for personal groceries.
Deathbed Transfers
Setting it up days before death usually fails scrutiny. It needs to be a bona fide operating entity.
Your Implementation Checklist
Draft Agreement
Work with an attorney to draft the FLP agreement, specifically defining General vs. Limited Partner rights.
Fund The FLP
Transfer titles of assets (real estate, brokerage accounts) into the FLP's name.
Order Valuation
Hire a qualified appraiser to determine the fair market value of the Limited Partner interests (applying discounts).
Gift Interests
Execute the gift of LP interests to heirs and file Form 709 to report the discounted value.
Day in the Life: The Family Bank
January 1: The Transfer
You transfer $2,000,000 of brokerage assets into the Smith Family Limited Partnership. You own 1% as GP (controlling everything) and 99% as LP.
August 1: The Valuation
A qualified appraiser determines that because the LP interests have no vote and cannot be easily sold, they are worth 35% less than the cash value.
The Math: $1,980,000 (your 99% LP share) is valued at ~$1,287,000 for gift tax purposes.
December 25: The Gift
You gift 20% of the LP interests to a trust for your children.
Tax Event: You used ~$260,000 of your lifetime exemption to move $400,000 of real assets. All future growth on that $400,000 is now outside your estate.
Years Later: The Protection
You get sued for malpractice. The creditor sees your assets are locked inside an FLP. They cannot seize the assets; they can only get a charging order (waiting for distributions you control). They settle for pennies on the dollar.
Family Limited Partnership (FLP) Strategy FAQ
Want To See If FLP Strategy Fits You?
In 30 minutes, we can usually tell you whether this strategy is worth pursuing, what documentation you'd need, and how it would interact with everything else in your financial life.
If we don't think this move makes sense for you, we'll say so directly—and help you focus on simpler, higher-ROI options instead.