Interest on Capital, Drawings and Settlement of the Deceased Partner's Account

Besides goodwill, revaluation, reserves and the profit share up to death, two further items are usually brought into the deceased partner's Capital Account before it can be finally closed:

• Interest on Capital up to the date of death — if the partnership deed provides for interest on capital, it is calculated on the deceased partner's capital balance for the part of the year they were alive, at the agreed rate, and credited to their Capital Account.
• Drawings (and interest on drawings, if the deed provides for it) up to the date of death — any amount already withdrawn by the deceased partner during the part-year is debited to their Capital Account, since it reduces what is still owed to them.

Once every adjustment is made — opening capital, goodwill, revaluation, reserves, profit to date of death, and interest on capital, less drawings and any revaluation loss/goodwill written off — the resulting balance is the total amount due to the deceased partner's estate.

Settlement. This amount is payable not to the partner but to their executor, and may be settled in any of the following ways, as agreed:

1. Paid in full immediately, in cash or by bank transfer, to the executor.
2. Paid partly in cash, with the balance transferred to an Executor's Loan Account, to be paid off later in a lump sum or by instalments.
3. Paid entirely by instalments over an agreed number of years. …