What happens to a partner’s share of partnership assets and liabilities when he or she dies?

The death of one of the partners in a partnership will bring the partnership to an end unless there is an agreement in place that provides otherwise.

The deceased’s executor has the right to demand that the assets of the partnership be sold or that the value of the deceased’s interest in partnership assets be paid to the estate.

The deceased’s estate will be jointly and severally liable for all partnership liabilities.

A partnership agreement designed to overcome this potential problem should be considered by all partnerships.

The agreement should cover a broad range of issues including:

• the continuation of the reconstituted partnership;
• the purchase by the continuing partners of the deceased partner’s interest in the partnership assets;
• a fair method of valuing that interest;
• a mechanism for funding the payment; and
• a fair approach to sharing the responsibility for partnership liabilities.

Liability limited by a scheme approved under Professional Standards Legislation

Disclaimer: This post contains information of a general nature only and is not intended to be used as advice in relation to a specific matter. Although every care has been taken in preparing the document, it may not be accurate or complete, particularly in the context of specific circumstances. MJM Lawyers disclaims responsibility for any errors or omissions.