I am acting in an estate where the deceased and his son were in partnership, with a written partnership agreement. The Will leaves the Relevant Property to a NRB DT along with cash to make that up to £325,000, if applicable. The residue is left on IPDI for the widow. The house was held on trust for the partnership. Do others think the deceased’s share of the partnership passes under his Will or does his death leave his son as sole trader, owning all the assets of the former partnership and therefore the House passes outside the estate to him?
If the property was held on Trust for the partnership, then it belongs to the Trust and not to the deceased. His Will therefore cannot include the property as it is not an asset of the individual. The business Trust still owns the property with the son as surviving partner, but not as his own asset. The Trust rules will apply to that asset when it is distributed from the business.
While I agree with SeniorSam80, and applaud his succinct but necessarily broad answer, like many queries on here the answer almost certainly reposes in the detailed contents of one or more documents. What does the trust say precisely? What does the partnership agreement say, bearing in mind that the PA 1890 will apply save where it says (as it does repeatedly) that it is subject to any contrary agreement.
Where two partners are in general partnership, the effect of the retirement of one partner is to bring about a dissolution of the partnership. This is expressly stated in Tann v Herrington: [2009] EWHC 445.
Absent contrary provision in the partnership agreement, or all the partners agreeing otherwise ad hoc, the partnership must be wound up and a dissolution account taken. Such a contractual provision, properly drafted, can alter the situation as it would otherwise be under ss39,44 PA and deal with any aspects of continuity of the business.
So the estate will contain whatever rights the deceased had on that basis. It may be that the trust deals with the death of the partner in question or provides trustee powers, which will be fiduciary in nature, to take action, and other provisions of the trust not least those about defining beneficiaries may be relevant. It is conceivable that the trust is a mechanism for making the property “partnership property” which will then merely be another asset of the firm for the previous paragraph.
A properly drafted trust and partnership agreement would seek to deal with what are obvious issues. Of course no drafter can foresee every eventuality and querists on here are often stuck with documents drafted by someone who has mangled a precedent, or not used one at all, or whose opinion of their drafting skills was in inverse proportion to their knowledge of the law e.g. my Auntie Ada. Who can forget the famous Will before a judge that said only “All for Mother”.
Continuing Jack’s (entirely correct) line of thought, if the partnership agreement is silent or non-existent, and the trust a bare trust or nominee for the partners/partnership (as is likely), I would expect the deceased’s share of the property to end up with the DT.
In the event, the partnership deed indicates that the beneficial interest in the farmhouse is held 100% for the now deceased partner and therefore forms part of his estate.
