Appendix E. Why Use Family Limited Liability Companies?

• Author: Jeffrey Robert Matsen
• Profession: Founder and managing partner of Matsen Voorhees Mintz LLP
• Pages: 99-102

99

APPENDIX

E

Why Use Family Limited

Liability Companies?

Estate Planning experts and professionals often refer to Family Limited Partnerships (FLPs) and Family

Limited Liability Companies (FLLCs). Most professionals now utilize FLLCs instead of FLPs because

FLLCs are less complicated to form, and the Manager of the FLLC is not personally liable (whereas the

general partner of a limited partnership is). Because the General Partner is personally liable, another

liability-shielded entity like an LLC or a corporation has to be formed to be the General Partner. This is

an additional expense, inconvenience and complication that the FLLC avoids. The following explanation

helps to understand why the use of FLLCs can be so advantageous.

1. What is an FLLC?

An FLLC can be utilized in your estate plan for making “leveraged” or “discounted” gifts to your children.

An FLLC is simply a partnership arrangement between family members. Typically, the FLLC is established

by parents or grandparents for purposes of making gifts to junior family members, while allowing the

senior family members to maintain full control over the management and investment decisions relating to

all of the underlying FLLC property.

2. How Do You Organize and Set Up an FLLC?

To establish an FLLC, the parents would transfer property to the FLLC in exchange for a 100% member

interest thereof. Typically, the parents would hold the member interest as Trustees of their Family Trust.