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Share of business partnership

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  • Share of business partnership

    Hello - I hope someone is able to give me some advice on the following.

    My father died last year, and I am named as personal representative on the Grant of Probate, as the named executors were both now retired and issued a Deed of Renunciation.
    In his will, my father left his estate to be split equally between myself and my two brothers.

    My two brothers and my father ran a business (partnership) between them for many years (I was not involved), but it was never very profitable, and a few years ago, my brother (let's call him brother A) left the partnership as it was felt that the business could no longer support all of them. His capital account at that time was in debt by around £35k, but my father transferred this debt to his own account rather than saddle brother A with that debt. The business has been carried on by brother B.

    When my father died last year, his capital account in the business stood at a positive £45k. To my mind, as the will says that his estate at the time of his death should be split equally between the three brothers, that should be split between the three of us at £15k each. However, brother B is of the opinion that, as brother A had his debt written off by my father a few years ago, it is unfair that he should then receive a further £15K out of the business as well, and considers that he had more than his share when he left. He proposes that the £45000 is therefore split just two ways, between he (brother B) and me. I can see brother B's point, although I am not sure that brother A would necessarily agree, but what would be the legal position? Can we, as the only beneficiaries, agree to vary the terms of the will on this basis, if we all agree? If we don't all agree, where would I stand as the named personal representative, if this share was withheld from brother A?

    Whatever happens, neither myself nor brother A want to be partners in the business, for fear of being saddled with debt should the business fold - it barely makes enough money to earn a living for brother B. The business certainly isn't profitable enough to pay out £45k, or any other sizeable lump sum, to either myself or my brothers, so whatever happens, the money will probably stay in the business as a loan or loans, to possibly be repaid over a period of time.

    (Just in case anyone should ask, the £35k transfer, which occurred about four years ago, has been declared to HMRC on the IHT 400 (IHT403))
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  • #2
    Re: Share of business partnership

    Morning Daveycrock and to LB,

    Slightly tricky if you don't all agree. If your father chose to make a gift in his lifetime with no proviso that it should have a bearing on his sons' inheritance then I would say respect his wishes - or did he express any wish that brother A's bailout should be offset against your respective inheritance?

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    • #3
      Re: Share of business partnership

      Originally posted by MissFM View Post
      Morning Daveycrock and to LB,

      Slightly tricky if you don't all agree. If your father chose to make a gift in his lifetime with no proviso that it should have a bearing on his sons' inheritance then I would say respect his wishes - or did he express any wish that brother A's bailout should be offset against your respective inheritance?
      Thanks for your reply. No proviso or wish that the gift should be offset was made at all. To be honest, I think we might come to some agreement over this anyway, but really the main thing I wanted to know was the legal position if we vary the terms of the will. Obviously, if we are all in agreement, nobody is going to be taking anybody to court, but I am aware as administrator, that I am supposed to keep accounts etc.. should the Probate Court wish to see them. Would that only be likely to happen in the event of a dispute between the other beneificiaries and myself?

      Comment


      • #4
        Re: Share of business partnership

        A's liability was fully transferred to F, and therefore ceased to exist as far as A is concerned. There was no mention or provision with regard to this being an 'advance'. Technically, A is entitled to the share stated in the Will. If you withold it and divide it between yourself and B, you could be looking at legal action.

        The estate now has control of the £45k interest previously owned by F, so it should be distributed. If the business lacks sufficient liquidity, then either it will have to be wound up and such funds as there are distributed pro rata, or some other solution found.

        Does B really want to stay with what seems to be a sinking ship?

        Comment


        • #5
          Re: Share of business partnership

          Originally posted by enquirer View Post
          A's liability was fully transferred to F, and therefore ceased to exist as far as A is concerned. There was no mention or provision with regard to this being an 'advance'. Technically, A is entitled to the share stated in the Will. If you withold it and divide it between yourself and B, you could be looking at legal action.

          The estate now has control of the £45k interest previously owned by F, so it should be distributed. If the business lacks sufficient liquidity, then either it will have to be wound up and such funds as there are distributed pro rata, or some other solution found.

          Does B really want to stay with what seems to be a sinking ship?
          Quite honestly, I fully agree with your last sentence, but he has his reasons. Thanks for your advice.

          Comment


          • #6
            Re: Share of business partnership

            Originally posted by Daveycrock View Post
            Thanks for your reply. No proviso or wish that the gift should be offset was made at all. To be honest, I think we might come to some agreement over this anyway, but really the main thing I wanted to know was the legal position if we vary the terms of the will. Obviously, if we are all in agreement, nobody is going to be taking anybody to court, but I am aware as administrator, that I am supposed to keep accounts etc.. should the Probate Court wish to see them. Would that only be likely to happen in the event of a dispute between the other beneificiaries and myself?
            If you are all in agreement that you wish to vary the Will you need to draw up, or have a solicitor draw up, a Deed of Variation with the terms of the variation very clearly set out and signed by all three of you, properly witnessed. You are not obliged to use a solicitor for this but perhaps it might be wise since brother A is relinquishing so much.

            See here: http://www.hmrc.gov.uk/cto/customerguide/page21.htm
            and here:
            http://www.mylawyer.co.uk/varying-a-...-A76991D77122/

            Comment

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