With JP Gilmartin, RDJ Glynn Solicitors

Family partnerships

Estate-planning describes the process whereby there is a transfer of wealth from one generation to the next, be it during a person's lifetime or upon their death. Not only does a business-person’s hard work up to that point deserve smart planning, but the future of the business demands it. A balance needs to be struck by parents between minimising tax leakage on transfers of wealth and maintaining control over assets until such time as children are in a position to assume responsibility for family assets or parents are happy to relinquish control over assets.

Family partnership objective: A family partnership (in which family members become partners) provides a mechanism for a parent to gift assets/funds to a child or children for the purposes of investment, while retaining control over the investment of those assets while they remain in the partnership structure.

Legal framework: The partners will enter into a partnership agreement that will govern the relationship between them. The partnership agreement will deal with various matters to include:

Funding: Each of the partners contributes an amount of capital to the partnership, which is invested as the partners may from time to time determine. The capital contributed by each partner usually determines the partnership shares. Parents would typically gift cash to their children in an amount equal to the available tax-free limits (currently €496,824) in order to avoid any immediate tax consequences and on the condition that it is invested in the family partnership. The partnership shares of the children would generally be much larger than those of the parents, so that the majority of the growth in underlying assets (and any income) is in the hands of the children.

Profits and losses: The agreement provides that the net profits of the partnership belong to the partners in proportion to their individual partnership shares. Any losses of the partnership are also borne by the partners in proportion to their partnership shares.

Managing partner: The agreement provides for the appointment of a managing partner (usually the matriarch or patriarch in a family), who is delegated such powers as may be necessary to deal with the day-to-day operation of the partnership.

Decision making: While all partners are entitled to vote at partnership meetings, the agreement can provide that voting rights are weighed in favour of one or both of the parents, so that all decisions of the partnership can effectively be controlled by the parent(s).

Dissolution: The agreement also typically provides for the dissolution of the partnership in certain circumstances and the method of distribution of the capital and accrued profits of the partnership in such circumstances.

A family partnership is therefore an effective and tax efficient method to enable parents to transfer assets to their children while effectively controlling the future investment of those assets on behalf of the children for an indefinite period.

JP Gilmartin ( This e-mail address is being protected from spam bots, you need JavaScript enabled to view it ) is a commercial lawyer at RDJ Glynn Solicitors.

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