The deceased partner's executors are entitled to remove their capital from the business. Future profits may be split among the remaining partners unless they continue to use the deceased partner's partnership property.
The partners in the old partnership have the right to use partnership property to pay outstanding debts, and to split what remains between themselves in accordance with the partnership agreement. This does not include income tax or National Insurance contributions, as partners are responsible for paying these individually.
What happens to the partnership if a partner dies?
If a partner dies the partnership must nominate another partner and inform HM Revenue & Customs (HMRC) as soon as possible. If they don’t, HMRC will nominate one and write to the partnership. That partner must then complete any outstanding partnership tax return.
For general partnerships, there is no legal requirement to tell anyone of the change. It is advisable to tell your solicitor and your accountant and the partnership's bank should be informed if there are any guarantees provided by the partners.
Reporting changes to limited partnerships
For limited partnerships and limited liability partnerships, you need to inform Companies House when a member joins or leaves. For more information, see running a company or partnership and reporting changes to Companies House.