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Business Partners

Partnership Protection

What is Partnership Protection?

In the interests of financial security, business stability and continuity, it is essential for partnerships to provide a safety net following the death of a partner. There should also be a partnership agreement in place that specifies that the partnership should continue on the death of a partner. If this is not in place, on the death of a partner, the partnership is automatically dissolved.

Partnership Protection is usually put in place to ensure that, on the death of a partner, their share of the partnership is available for the other partners to buy and that there is sufficient cash available to buy the share.

This is normally done by:

  • Taking out a life insurance policy which can also include critical illness cover for each partner to the value of their share of the partnership.
  • Placing these life insurance policies in trust so that any payout is available to the remaining partners without any tax implication

The risk of not setting up some Partnership Protection is as follows:

  • The share may be taken over by someone who does not share the Partnership's objectives, and may even be a competitor.
  • Their share may go to the deceased's family, which has no interest in the business and may prefer a cash lump sum.
  • The Partnership or other partners may not have the resources to buy the deceased's share of the Partnership.

We can advise you on the best arrangement for your Partnership, and put the necessary policies and trusts in place. Contact us today!