What it is
Private fund interests are illiquid: there is no market, securities laws restrict resale, and LPAs require GP consent to transfer. LPs should plan to hold for the full term.
How it works
Reasonable LPAs still allow transfers to family trusts, estates and affiliates with consent not unreasonably withheld, and describe what happens on death or disability.
Example: an LP wants to move an interest into a revocable family trust for estate planning. A friendly LPA permits this with notice; a strict one lets the GP refuse for any reason.Good for LPs vs. watch out for
✓ Good for LPs
- Defined term with limited, LP-approved extensions
- Permitted transfers to trusts, estates and affiliates
- Consent “not unreasonably withheld” for estate-planning transfers
- Per-deal distributions returning capital along the way
⚠ Watch out for
- Open-ended term or unlimited GP extensions
- GP may refuse any transfer for any reason with no exceptions
- Transfer fees
- No liquidity until the final property sells
How Story Samurai Investments handles it
Template: interests are restricted securities; transfers need GP consent and must comply with securities and tax rules; there are no withdrawal or redemption rights (LPA Art. 9). The term is [PLACEHOLDER – term/hold period] with up to [PLACEHOLDER] extensions; further extensions need LP consent (LPA §1.5, §4.3(d)). The current template gives the GP sole discretion over transfers; a permitted-transferee carve-out for estate planning is [PLACEHOLDER – recommended for attorney consideration]. Per-deal distributions can return capital before the term ends.
Based on our template documents (TEMPLATE, DRAFT FOR ATTORNEY REVIEW, NOT FOR USE). The final Limited Partnership Agreement controls.
Where to find it in the documents
- LPA §1.5, §4.3(d), Art. 9
- PPM §11
- Risk Factors #2