Family Limited Partnerships for Cryptocurrency: When Complexity Actually Helps #
A family limited partnership lets you control Cryptocurrency assets while gradually transferring ownership to your kids or other family members. You act as the general partner with full management authority. Your family members hold limited partnership interests that own a piece of the assets but can’t make decisions about them.
The structure works like this. You contribute Cryptocurrency to the FLP. You retain a small general partner interest, maybe 1-2%, which gives you complete control over the partnership. The remaining 98-99% gets divided into limited partnership interests. You gift those limited interests to family members over time, using annual gift tax exclusions to avoid triggering gift taxes.
Your kids now own most of the Cryptocurrency through their limited partnership shares, but you still control everything as general partner. You decide when to buy, sell, or hold. You manage the D’Cent Cold Wallet holding the actual assets. They can’t force distributions or override your decisions. They just own an increasing share of the value.
Estate Planning is where this gets useful. You’re transferring wealth to the next generation while you’re alive, reducing your taxable estate, but you’re not giving up control. When you die, the limited partnership interests your family already owns pass to them without probate. Only your general partner interest goes through your estate, and that’s a tiny fraction of the total value.
The tax benefits come from valuation discounts. Limited partnership interests are worth less than their proportional share of assets because they lack control and marketability. You can often claim 20-40% discounts when gifting these interests, meaning you transfer more wealth using less of your lifetime gift exemption.
Here’s the problem. Family limited partnerships are complicated and expensive to set up correctly. You need partnership agreements, annual tax returns, formal meetings, and careful documentation of every transaction. You’re maintaining a business entity with multiple stakeholders and fiduciary duties. Most Cryptocurrency holders don’t need this level of complexity.
If you’re just trying to protect assets and plan for succession, a simple LLC owned by a trust does the job. The LLC holds the Cryptocurrency, the trust owns the LLC membership, and your family inherits through the trust without probate. Clean, straightforward, minimal ongoing Compliance.
FLPs make sense when you have multiple generations involved, serious estate tax concerns, and enough wealth to justify the setup costs. You’re probably looking at $10 million plus in total assets before the tax savings outweigh the legal fees and annual maintenance.
Most wealth management firms focus on growing your Portfolio and providing fiduciary guidance on investments. Digital Wealth Partners handles asset Custody and investment advisory services, but they’re not setting up multi-generational partnership structures or managing Family Governance issues.
You need Family Office coordination for this. Digital Ascension Group handles the entity formation, the tax strategy, the annual gifting programs, and the Succession Planning that makes an FLP work properly. They’re also the ones who tell you when a simpler structure accomplishes the same goals without the complexity.
The default answer for most people holding Cryptocurrency is still an LLC with Cold Wallet Custody. You get liability protection, clean tax reporting, and straightforward Succession Planning. Add an FLP when your Estate Planning needs justify the additional cost and Compliance burden, not before.
Contact Digital Ascension Group to learn how our Family Office services can coordinate your complete financial picture.
