Texas Life Agent Practice Exam

The agreement among surviving partners to buy the interest of a deceased partner is known as?

1. A Life Settlement

2. A Buy and Sell Agreement

3. A Partnership Agreement

4. A Survivorship Agreement

The correct answer is: A Buy and Sell Agreement

The agreement among surviving partners to buy the interest of a deceased partner is known as a Buy and Sell Agreement. This type of agreement is crucial in partnership situations, as it outlines the terms under which the remaining partners can purchase the deceased partner's share of the partnership. The primary purpose of this agreement is to provide a clear process for transferring the deceased partner's interest and ensuring that the remaining partners have control over who becomes a new partner in the business. This agreement typically includes provisions regarding the valuation of the deceased partner's share, the method of payment, and the implications for the partnership's continuity. It helps prevent potential disputes among surviving partners and the heirs of the deceased partner, ensuring a smooth transition in ownership. The other options listed do not accurately describe this mechanism. A Life Settlement specifically pertains to the sale of a life insurance policy for a lump sum payment and is not related to partnership agreements. A Partnership Agreement is a broader document that outlines the terms of the partnership as a whole, including roles, responsibilities, and profit sharing, but does not focus specifically on what happens when a partner passes away. A Survivorship Agreement usually refers to arrangements related to joint ownership of property where the surviving owner receives the deceased owner's share but is not specifically designed for partnerships