The functions of a partnership are controlled by the Partnership Act in each state and territory. These Acts state that the death of a partner automatically dissolves the partnership unless an agreement is in place. Without a clear plan, the future of the partnership and its assets can be at risk.
Here’s what you need to consider for your clients in partnerships:
Automatic dissolution: Upon a partner's death, the partnership is dissolved unless protected by an agreement.
No agreement?: Without a formal partnership agreement, asset distribution occurs after settling debts, which can complicate the process.
Buy-Sell Agreements: These agreements allow surviving partners to purchase the deceased partner's interests, ensuring smoother transitions.
Risks of no agreement: Disputes can arise between remaining partners and beneficiaries, potentially disrupting the business's continuity.
Action item: Ensure your clients have a comprehensive partnership agreement to provide clarity and safeguard against future challenges.
Encourage your clients to consult legal professionals to protect their partnership and beneficiaries' interests.
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