During the week, in the context of reviewing a buy-sell deed, we had to provide advice about whether the terms of the buy-sell deed would overrule the provisions of one of the partner’s wills.
While there were a number of factors that may potentially impact on the answer to this question, in very simple terms, contractual arrangements will always override the provisions of a will.
As the buy-sell deed was crafted on the basis of option agreements, then the position was therefore that they would override any inconsistent provision of the will.
In the context of the buy-sell arrangement here, there were two individual partners who had implemented buy-sell arrangements.
For a combination of reasons, the parties agreed to implement wills whereby they would each gift their respective partnership interest to their co-partner on death.
The agreement to make these gifts however was predicated on the assumption that the exiting partner’s estate would receive insurance proceeds at least equal to (if not greater than) the market value of their partnership interests.
Option agreements were still put in place however to cover the partners against a range of risks, including:
- a partner changing their will;
- the will of an exiting partner being challenged; and
- the insurance proceeds received being inadequate as compared to the market value at the date of death.