Dealing with Property After a Business Partner Dies
Two business partners and I purchased a house in Vermont as a rental business venture. One of the partners died recently. Can we simply have his name removed from the deed? None of us listed beneficiaries when we purchased the property. —J.B., Corona Queens, N.Y.
The answer to your question lies in the documents that established your partnership or that governed your purchase. Take a look at the paperwork and if you're still unsure, have an attorney familiar with Vermont law (which governs this transaction) examine the documents and give you an answer.
Property in Vermont can be owned in a couple of different ways, says Douglas K. Riley, an attorney with Lisman Webster & Leckerling in Burlington. There's "joint tenancy with right of survivorship" and "tenancy in common."
Under the first arrangement, "joint tenancy with right of survivorship," your deceased partner's interest in the property would automatically be surrendered to the remaining partners. But if you purchased the rental property as tenants-in-common, the deceased partner's interest would revert to his estate and go through probate as part of his will, or be parceled out to his heirs pursuant to state law if he didn't have a will.
The other possibility is that you signed a partnership agreement (BusinessWeek SmallBiz, June/July, 2007) when you entered into this business venture. "A partnership agreement would control the situation if the property is held in the name of the partnership," Riley says. If there was a binding buy-sell arrangement in the partnership agreement, that would govern the transfer of the property interest to the remaining partners.
Your situation underscores the need to get written agreements in place when you're going into business, says Alan E. Weiner, an accountant and attorney with Holtz Rubenstein Reminick in Melville, N.Y. "All co-ventures, for any type of business, should have written agreements, entered into when everyone is friendly, to avoid later squabbles and, in the event of a death, problems with the heirs," he says.