What if an owner leaves the business?03 December 2014
If a partnership, including a limited liability partnership, is dissolved other than because of the settlor’s death or the partner or member resigns or retires from the business before a death/critical illness claim, then any subsequent claim proceeds will be held for the settlor absolutely. The trustees can assign the life policy to the departing partner or member and they subsequently may decide to assign this to another trust such as our Flexible Trust. The beneficiaries of the Flexible Trust include the family members of the settlor, so the departing partner could use the life policy for personal protection.
If a shareholding settlor stops holding shares in the company, for any reason other than their death, and before a death or critical illness claim, then any subsequent claim proceeds will be held for the benefit of the settlor absolutely. The trustees can assign the life policy to the departing shareholder and, as above, they could decide to assign the policy into a Flexible Trust.
The ‘revolving door’ clause means that the departing owner will automatically be removed as a beneficiary of the business trusts set up by the others. If the departing individual is a trustee of the others’ policies, it would be usual for them to retire as a trustee. We can provide a sample deed for this purpose.