If a partner dies, what happens to their share of goodwill in the partnership?

When a partner in a partnership dies, their share of the goodwill typically goes to the deceased partner's estate. This means that the value associated with the partnership—created by the reputation, business relationships, and other intangible factors related to the partner's contributions—will be considered part of their estate and managed according to their will or applicable laws of inheritance. This arrangement allows the estate to benefit from the value generated by the deceased partner's involvement in the business, ensuring that their heirs can receive financial compensation for that goodwill.

In many partnership agreements, the treatment of a deceased partner’s share of goodwill is explicitly defined and often aligns with this principle, ensuring that the interests of the deceased partner are respected while also allowing the partnership to continue operating smoothly.