You can use a number of different strategies to bolster your limited partnership protection. For example, your limited partnership agreement might: 1) give the general partners full discretion to withhold profit distributions; 2) the partnership agreement can specifically restrict the transfer of a limited partnership interest without the consent of the general partner, and/or all or a majority of the limited partners; 3) the agreement may further prevent a limited partner from withdrawing capital contributions without unanimous partner consent; 4) the agreement may also specify that a creditor of a limited partner becomes only an assignee of the limited partner's interest and acquires absolutely no partnership rights other than rights to distributions; 5) the limited partnership agreement can further allow the general partner to 'assess' the limited partners for further contributions. This obligation should expressly extend to charging order creditors; 6) 'high-risk' family members might own a smaller partnership interest or be entitled to a proportionately smaller share of the income; 7) spouses may title their limited partnership interests as tenants-by-the-entirety – if their state creditor protects this tenancy type. This protects the partnership interest from creditor claims against one spouse; 8) finally, if you do invest in a non-controlled limited partnership or limited liability company, you may title your ownership interest to a family limited partnership that you do control. A well-drafted limited partnership agreement can create a formidable creditor barrier. An Asset Protection attorney would know how to optimize the protection available from a limited partnership. As a final protective measure, you can encumber or lien your partnership interest or its underlying assets so the secured creditor has first claim to profit distributions before the charging order creditor.
