The death or critical illness of a partner can cause considerable disruption to a law firm’s business, causing emotional turmoil and highlighting potential knowledge gaps as well as having financial implications. There may be debts that are repayable on the incapacitation of a partner, including bank overdrafts, hire purchase agreements, bank loans and a partner’s capital account. The remaining partners will need to decide what happens to the deceased’s share of the business and resolve any issues relating to the partner’s spouse or the deceased’s estate.
A suitably structured partnership protection strategy can ensure that the business remains in the control of the active partners while simultaneously assisting the dependants of the deceased partner. It can facilitate business continuity by ensuring that a commercial purchase price is obtained for the share of the business, payable to the spouse or estate of the deceased partner, without undue delay.
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