Estate Planning for the Practicing Accountant Webinar – September 12
Media Business Attorney Discusses Handling a Deceased Partner’s Spouse
As an experienced Media Business Attorney, clients come to me all the time with questions about how to handle a deceased partners spouse. The difficulty with the death of a partner is that you’ve now lost one of the valuable assets of the company. You now have to deal with it in a couple of different ways. How do I either replace him as an asset because he has a certain value and contribution to the business? You now have to deal with have I prepared for this event in my operation of the company in the past. Have we entered into certain buy/sell agreements, agreements that say what happens if we are going to dissolve by death or some other circumstance, and have I set forth in that corporate governance document a plan as to what should happen.
The worst case scenario is that I don’t have a plan, I didn’t make any remedies for this particular situation, and I now have a new partner. This partner is the spouse, the son, or any other individual to whom my partner has left his ownership interest in this company. That is a difficult situation because now you are partners with a spouse who doesn’t know anything about the company, a son who may be too young and not know anything about the company, or a third party who you may or may not be able to get along with during the operation of your company. At that point in time, there’s usually a provision that says if one of us passes away we may have some life insurance that we’ve added to the value of the company. This says okay I’ve got an obligation to buy out and to pay my partner’s spouse insurance proceeds or there’s some provision that we’ve reached out that says if one of us passes away we’re going to pay it out on a certain amount so now the spouse of the deceased partner has a source of income that helps her out. If worse comes to worse and the wife or the son shows up and says, “Hey, I’m your new partner,” you’re now into the dissolution process or the exit process that we can talk about in a different way, which is establishing a value, negotiating an exit, and making arrangements for a payout which should have been done in advance of this happening.
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This educational blog was brought to you by experienced Business Attorney Walter J. Timby. Our law firm proudly represents clients throughout Media, as well as Pennsylvania, the greater Philadelphia area, Delaware and New Jersey.
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