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Question: I have a question regarding a partnership account. What should happen to the partnership account when one of the two partners dies? Does the executor of the decedent’s estate have any rights to it? Can the remaining partner close the account? Should the bank freeze the account? Your help or direction to information about this subject would be greatly appreciated.
Answer: What happens to a partnership upon death of a partner depends on what the partnership agreement calls for. The partnership agreement could provide that the partnership continues with the partnership assets belonging to the remaining partner(s). The agreement could provide that the partnership is terminated with the deceased partner's share going to his or her estate. The agreement could provide that a new partner be named to replace the deceased partner. It is also possible that the partners never executed an agreement. The point is, you don't know. If the surviving partner had signing authority on the account, you could allow that partner to close that account. Then it is the surviving partner's responsibility to distribute the money according to the partnership agreement. If the surviving partner did not have signing authority on the account, then you should freeze the account until you get written instructions as to the disposition of the account. This will keep the bank out of a potential issue of wrongful payment. If you cannot get written instructions as to the disposition of the funds, then you should talk with your local attorney about interpleading the funds into the registry of the court. If you have to interplead, your legal fees come off the top, and that usually persuades the claimants to enter into an agreed order.
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