Putting Personal Residences into an FLP or FLLC: A No-No
By: Jeffrey R. Matsen, Esq.
The question of whether or not a personal family residence should be placed into a Family Limited Partnership (“FLP”) or Family Limited Liability Company (“FLLC”) is a frequent topic for discussion. The impetus for such a decision is based on the theory that the FLP or FLLC affords the owner a degree of asset protection against personal liability because a creditor is allegedly limited to a Charging Order Remedy when trying to get at the assets inside the FLP or FLLC. A Charging Order limits the creditor to a distribution right rather than the ability to seize the assets themselves within the FLP or FLLC. Whether or not the Charging Order Remedy really effectively precludes a creditor from getting to the assets of the FLP or FLLC is a question which I have addressed in other articles. In any case, a creditor does normally have a more difficult time getting to assets that are inside an FLP or an FLLC than if they are held in the owner’s individual name.
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