Family Investment LLPs: A Smart Vehicle for Managing Family Wealth

A Family Investment LLP (FILLP) is an increasingly popular structure for managing and preserving family wealth. While trusts have traditionally been the go-to solution, recent legislative changes and increased complexity have made FILLPs a compelling alternative. This article outlines how a Family Investment LLP works and why it could be an ideal strategy for securing your family’s financial future.

A FILLP operates like any other Limited Liability Partnership but is specifically designed to manage family investments. It allows families to pool assets efficiently while maintaining control and flexibility.

Key Features

• Tax Transparency: LLPs are tax-transparent, meaning income and gains flow directly through to individual partners. This allows for strategic allocation of income to family members who may be subject to lower tax rates.

  
  

• Flexible Profit Sharing: Income and gains can be allocated in accordance with the partnership agreement, allowing tailored distributions.

  
  

• Generational Planning: Senior family members can retain control and decision-making powers while gradually transferring economic interest to younger generations.

  
  

Key Benefits

• Tax Efficiency: One of the most attractive features of a FILLP is the ability to allocate income to family members in lower tax brackets. A well-drafted partnership agreement can enable a significant portion of income to be received by non-taxpaying or lower-rate taxpayers, thereby reducing the family’s overall tax burden.

  
  

• Capital Gains Planning: A major benefit is the ability to transfer capital interests without triggering an immediate capital gains tax (CGT) liability. These transfers are treated as changes in partnership rights rather than disposals, allowing for gradual wealth transfer while retaining control.

  
  

• Separation of Ownership and Control: The LLP structure allows senior members to act as managing partners, retaining control over decision-making even as economic interests are passed down. This ensures continuity in how family wealth is managed, in line with the founders’ intentions.

  
  

• Stamp Duty and CGT Efficiency: The transfer of property or assets into an LLP does not generally trigger CGT or stamp duty, provided that the beneficial interest remains unchanged among partners. This is a key advantage over trusts or companies, where such transfers may incur charges.

  
  

Speak to an Expert

If you're considering long-term wealth preservation, a Family Investment LLP could be an ideal solution. For bespoke advice tailored to your family's needs, please get in touch with us—we would be delighted to help you explore your options.

Authored by: The London Tax Team