Life Interest in a Partnership Capital Account

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A family partnership business consisted of husband and wife and son and there was a partnerhship agreement in place sharing the profits 1/3 each. 

Husband (father) unfortunatley passed away and his Will left his partnership capital to benefit his wife for her lifetime and then to the son.

So there is a life interest trust in relation to this capital account, wife holds the life interest and son is the remainderman. 

Pondersing how profits should be shared? 

Wife would be entitled to the enjoy profits in relation to deceased husbands capital but does this remain a 1/3 share per the partnership agreement or perhaps % return based on the value of cpaital held?

Any thoughts or guidance much appreciated. 

 

 

 

Replies (5)

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By Tax Dragon
20th Jun 2024 19:23

I would suggest not relying on any response in here, as it's real people's real money that you're playing with. Was there a partnership deed? Does PA1890 apply? Who are the trustees of the trust? Are there tame solicitors who could advise? Etc.

If there's nothing to counter it, the capital account is basically a pot of cash with no entitlement to profits (PA probably gives 5% pa or summat). But I refer you to my opening paragraph.

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Replying to Tax Dragon:
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By FrankTax
20th Jun 2024 23:28

Thank you, I'd never rely on responses on a forum but they can be useful in directing towards relevant sources of guidance/legislation.

Does feel like a query for a senior tax consultant and/or suitably experienced solicitor.

The partnership agreement isn't all that detailed.

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David Winch
By David Winch
21st Jun 2024 09:53

I would suggest that the partners be advised to get written legal advice and perhaps draw up a new partnership agreement between mother and son in the light of that advice.
Be aware of Partnership Act 1890 provisions, particularly sections 33 (dissolution on death, etc) and 24 (profit shares, interest on capital, etc) and how the agreements between the partners impact on these issues.
David

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Replying to davidwinch:
David Winch
By David Winch
21st Jun 2024 11:38

I should also have mentioned sections 42 and 43 Partnership Act 1890 as mentioned in the case to which Justin Bryant refers below.

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