DIY Legal Forms

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Purchase Of Deceased Partner's Interest

(Life Insurance Proceeds)

1. Introduction. Agreement made [date] between [names], Partners in the [name] (Partnership).

2. Intention of Partners. On [date], the Partners entered in a Partnership Agreement, organizing Partnership. The Partners now want to provide for the purchase of a deceased Partner's interest in Partnership by the surviving Partners or Partner at a fair price and in an orderly manner to avoid liquidation of Partnership and ensure its continuation.

3. Designation of Trustee. [Bank], with offices at [address], has agreed to act as Trustee. As its designation as Trustee is acceptable to each Partner, [bank] is designated Trustee under this Agreement.

4. Life Insurance Policies. Policies of life insurance will be acquired by each Partner on the lives of the other Partners. The proceeds of these policies are to be payable to the Trustee and will be used to purchase a deceased Partner's interest in Partnership. The policies will be deposited with the Trustee. Additional insurance coverage may be purchased. All additional policies purchased are to be deposited with the Trustee.

5. Payment of Premiums. It is each Partner's responsibility to pay the premiums due on the policies purchased by that Partner. The Trustee is entitled to proof of the payment of all premiums due from each Partner within [number] days of the premium payment date. Each Partner is the owner of the policies purchased by the Partner and will do nothing to impair or dispose of the interest that Partnership has in the policies.

6. Entire Interest of Deceased Partner Must Be Purchased. The remaining Partners must purchase the deceased Partner's entire interest in Partnership. The deceased Partner's estate must sell its entire interest in Partnership to the remaining Partners.

7. Purchase Price. The purchase price will be an amount equal to the balance in the deceased Partner's capital account together with a sum equal to [number] times the average net income earned by Partnership in the [number] fiscal years immediately prior to the deceased Partner's death. If the deceased Partner's death occurs in the last six months of any fiscal year, that fiscal year shall be one of the [number] years included for the computation of average net income. The determination by Partnership's certified public accountants of Partnership's average net income shall be conclusive upon all parties.

8. Payment Terms. Within [number] weeks after the appointment and qualification of the deceased Partner's legal representative, payment is to be made to the representative as follows:

a. The entire purchase price is to be paid if it is less than ........ dollars ($........);

b. If the purchase price is ........ dollars ($........) or more, .......... dollars ($........) is to be paid, and the surviving Partners shall execute and deliver a promissory note for the balance, payable [number] months after delivery with interest at ........ percent (........%) per annum.

9. Transfer of Deceased Partner's Interest. Simultaneously with the payment of the purchase price as provided in Paragraph 8, the deceased Partner's legal representative will deliver to the surviving Partners any instruments that they may reasonably require to evidence the transfer to them of the deceased Partner's interest in Partnership. The surviving Partners will deliver to the deceased Partner's legal representative an agreement holding the deceased Partner's estate, heirs, and legatees harmless from all third-party claims against Partnership.

10. Closing of Transaction. The purchase price will be paid and all instruments executed and delivered at the Trustee's offices. Until the closing, the Trustee shall hold the proceeds of the policies in an escrow account maintained by the Trustee.

11. Rights of Surviving Partners to Policies on Their Lives. Each surviving Partner may purchase from the deceased Partner's estate the policies the estate holds on the Partner's life. The purchase price will be equal to the cash surrender value of the policies as of the date of the deceased Partner's death together with the unearned portion of any premiums as of the deceased Partner's date of death. This option must be exercised within [number] weeks after the appointment and qualification of the deceased Partner's legal representative by payment of the purchase price of the policies in cash to the Trustee. Simultaneously with payment, the deceased Partner's legal representative will deliver all transfer documents to the Trustee who will deliver them together with the policies to the surviving Partners. If this option is not exercised, the Trustee will deliver the policy on the life of the Partner not exercising the option to the deceased Partner's legal representative with no rights in the policy remaining in the surviving Partners.

12. Trustee's Fees. The Trustee will receive as its fee ........ percent (........%) of the proceeds of the insurance policies. In addition, it will be reimbursed for any reasonable expense incurred by it under this Agreement. The Trustee's fee is to be deducted from the proceeds collected. If this Agreement terminates prior to the death of one of the Partners, the Trustee is entitled to the sum of ........ dollars ($........), payment of which is to be shared equally by the Partners.

13. Simultaneous Death of Partner. If all the Partners die within [number] months of each other, the Trustee will collect the proceeds of all the policies deposited with it and turn the proceeds over to the estates of the owners of the policies. Partnership will then liquidate as provided for in the Partnership Agreement.

14. Binding Upon All Parties. This Agreement is binding upon all the parties, their heirs, assigns, and legal representatives. This Agreement may not be assigned. The legal representative of any deceased Partner's estate is bound by this Agreement.

[signatures]

Partners

*** If Required By State Law ***

This Section for Notary:

Acknowledgment

State of _________

County of ________ [County]

On [Date] before me, [Name of Notary], notary, personally appeared [Name of Person(s) Involved], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

Witness my hand and official seal.

Signature ________
Notary

My commission expires: _____

(Seal)