Asking on behalf of a colleague
Dear all,
I am currently acting for a lady who is a member of a farming partnership with her son-in-law and her grandson. Her husband who pre-deceased her was also a party to the Partnership Agreement.
I am in the process of preparing my client’s updated Will, but I would like some guidance as to how the Partnership Agreement would take effect when my client is to pass away.
The Partnership Agreement is undated, but signed by all parties and contains an express term which states: “On the death of any Partner the survivors shall have the option (to be exercised within one month of the death of the deceased Partner) of purchasing the share of the deceased Partner in the capital assets and profits of the Partnership. The purchase price of a share of any deceased partner shall be the net value of the share as shall stand and appear in a balance sheet prepared by the Partnership accountants at the date of the deceased Partner and shall be payable by five equal annual instalments the first instalment to be paid within 6 months of the date of such a death of a partner and subsequent instalments which shall carry no interest shall be payable on the subsequent anniversaries thereof.”
My client’s Will instructions are that she would like the farm to be held in Trust so the surviving partners can continue to occupy it but when their right of occupation ceases, it passes to her children.
The farmland consists of three separate titles which are all held in my client’s sole name, and the title which contains the farmhouse is subject to a mortgage. I should be grateful for some guidance on the following:-
- If the mortgage is paid by the Partnership, could it be argued that the Title is held by the Partnership as opposed to my individual client despite the fact that it is held in my client’s sole name?
- When my client passes away, could it be argued that the surviving partners would have to buy out the deceased partner’s share of the Title, or should it simply be discharged from the monies of her residuary estate?
- Would my client be able to bequeath the assets of the partnership to include livestock, deadstock, crops and machinery to the surviving Partners within her Will, or would the surviving partners have to buy out her share?
- If the only option is for the surviving Partners to buy out the deceased Partner’s share of the Partnership, is there any way that the Agreement can be overridden so that the deceased partner can bequest her share of the Partnership Assets to the surviving partners without payment?
I thank you in advance for your comments.