Setting up an FLP to operate a family business or investment can be a great way to protect and manage a family's assets effectively and efficiently. From a tax perspective, there are associated benefits. First, you can lower estate and gift tax as the family transfers assets to the next generation. Second, you can lower the family's aggregate federal income tax.

Structuring an FLP can be complex, in that this arrangement must balance potentially competing goals and objectives (business, tax, and personal). The FLP can be expensive to maintain and the partnership rules are complex. Valuation of the assets is key!