on Wednesday, 15 December 2021.
We previously explored how the terms of Dr Otto's Will might interact with the way in which he owned his share of a GP Surgery premises. Dr Otto is survived by his wife, Geraldine, a dentist, who wishes to make a Will, nominating the successor to her share of private dental practice, Gnasher and Brace (G&B).
Mrs Otto owns a half share of G&B, while the other half share is owned by Mrs Otto's colleague, Mrs Spencer. The partners entered into a partnership agreement, which sets out the framework of how G&B will be run. The agreement says that the partnership will remain solvent following the death of either of the partners.
Mrs Otto wishes the whole of her estate to be divided equally between her three children. However, she would like her share of G&B to pass to her eldest daughter, Olive, as she is pursuing a career in dentistry. Mrs Otto has already discussed this with Olive, who has agreed to maintain the partnership with Mrs Spencer. Mrs Otto has also told her other two children that Olive will be the sole beneficiary of her half share of G&B.
A Will is the heart of any succession plan and a poorly drafted Will can lead to costly disputes. It is vital for the person who is making the Will to give careful consideration to its terms to ensure that their estate is distributed in accordance with their wishes.
Careful consideration is particularly important when a business asset forms part of an estate - as is the case with Mrs Otto. Without a Will in place, Mrs Otto's share in the partnership could pass to:
The general position is that a partnership will be dissolved on the death of any of the partners, unless there is an agreement between them that it should continue. The provisions of the partnership agreement are therefore essential.
Subject to any contrary provision in the partnership agreement, a share in a partnership can be gifted by an existing partner under their Will.
It is therefore, important to check G&B's partnership agreement for any terms that could override the gift of Mrs Otto's share of the partnership to Olive or restrict it.
A Will can be revoked at any time and does not come into effect until the person who made the Will has died. This means that Mrs Otto can make her Will, but change her mind about its terms later.
G&B's partnership agreement says that the partnership can remain solvent on the death of either partner.
Mrs Otto can make an outright gift of her partnership share to Olive, or she could leave her share of the partnership to a trust. In view of Olive's willingness to continue the partnership following her mother's death, an outright gift seems the most appropriate option. If this situation changes, Mrs Otto could decide to update her Will to leave her share of the partnership to a trust (which can provide for flexibility following her death).
VWV's Private Client and Healthcare teams work together to provide tailored advice to you about your Will, the ownership of your share of a business, the terms of your partnership agreement and how those terms might affect the succession of your interest in the partnership. It is important to review your Will and partnership agreement regularly - particularly, after significant personal or professional events.