Monica Lane and her son David created a trading farm partnership in 2002 (which did not include the land). The agreement provided for dissolution of the partnership in the event of one of the partners becoming permanently incapacitated.
How the dispute arose
In her last will, dated 2013, Monica left her share and interest in the partnership to David and her other assets left to her daughter, Susan, and the two children of her deceased son, Peter. The residuary estate was to be divided between the four of them. Monica died in 2019 and David in 2021. Susan was named as executrix of Monica’s will and Karen Lane of her husband, David’s, will.
A dispute arose between Susan and Karen about whether Monica was able to leave her share and interest in the partnership to David. Susan maintained that Monica became permanently incapacitated before she died so the partnership should have been dissolved, meaning that her share and interest in the partnership was no longer hers to bequeath and should have fallen into the residuary estate. Karen, David’s wife, contested that this was not the case and that the partnership remained in situ. She also wanted to remove Susan as executrix.
Share and interest in partnership can be gifted
The first point for the judge to consider was to establish whether or not Monica’s share and interest in the partnership was hers to give. The second was the removal of Susan as executrix.
The judge determined that regardless of Monica’s incapacity, a partner’s share and interest in a partnership (generally described in financial terms) is only realised once the partnership has been wound up. Because the winding up of the partnership as a result of her incapacity had not been completed before her death, she had not received any payment for her share and ‘she would only cease to have a share and interest once she had been paid in full, and this had not happened’. As the judge noted, ‘the natural reading of the gift is that Monica wanted the value of her rights in the partnership to be passed to David so that he would have the entirety of the benefit of it’ and ruled in favour of Karen.
As far as the removal of Susan as executrix was concerned, the judge found that Susan’s administration of the estate was deficient and that it would be preferable to appoint a professional, independent administrator.
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