134300 - Partnerships - death or retirement of a partner

The rights of an outgoing partners through death or retirement can be found at S42 Partnership Act 1890.

Partners may assign their interest in a partnership, or they may confer it on death or retirement to another person, but that does not automatically make the assignee (the partner who receives the assigned partnership interest) a partner. A mutually deliberate decision by the assignee and the surviving partners for the assignee to be made a partner is required.

On the death of a partner, if no arrangements or agreements have been made the estate of the deceased person is entitled to the share of the profits made since death that are attributable to the use of their share of the partnership assets, or to interest at 5% per annum on their share until their share of the partnership is paid out. The choice between which of the two the estate receives is down to the personal representatives.

Depending on the precise terms of the agreement between the surviving partners and the personal representatives, the sums payable in these circumstances may be interest or annual payments deductible in arriving at the trade profits of the partnership and chargeable as savings income on the recipients.