'shotgun' business contract

[is mikehunt there]

i was discussing 'shotgun' contracts with someone recently in the DR
and id appreciate any insights you may have regarding the following!

A shotgun contract
A 'shotgun' contract is set up between; for example 2+ partners in a (eg house construction ) business.
This contract would indicate the following;

• the partners will all contribute X dollars
• we will produce X houses and sell them etc

nothing unusual so far about this contract, what stunned me was what i was told next;
[LIST][*]if a partner dies the assets go to the remaining partner (s)[*]the partners' create a contract between themselves to protect the business from wives/husbands/family that have NO connection to this business pre-death. That is to say, they (family) dont actively work in the business! However after death, these family members are potentially able to disrupt the business by rightfully wanting their share of the business/funds/assets.

Rationale
according to the person i spoke too for a contract like this;

• In the DR apparently when a partner/owner of a business/land dies it can take many many months to sort out who is the rightful heir to this money.
• i had an experience recently, i was looking at some land, the owner apparently died and the real estate agent basically said 'forget about it...its going to take months to be sorted out via the legal process in the DR'!
  
• this slowness obviously will affect the surviving partner as he can't continue with the business untill all these legal things have been sorted out
  
• an heir may come forward and cause problems for this business that may well have been working very well prior to his death
  • A contract will protect the business from the above mentioned disruption

• By the family of the deceased seeking claim over the business they are very definitely causing problems for the remaining partner by decreasing available business assets/cash flow.........which inturn can lead to the death of the business

my thoughts

• in my country if a business partner dies...the partnership dissolves and assets are split. As i was informed recently, in the DR this process can be slow! Clearly the surviving other partner would never want to be put in this situation of having all business assets frozen
• by signing a contract like this would you not be placing yourself at risk for and 'accident'. As infact, one would be signing away his or her assets/money away, so that if you happened to die it would go to your business partner....a risky proposition!!!!!!!!!!
  
  i mean i understand the rationale as ive been in business before with another partner with whom i got on very well! however the wife could not stop sticking her nose into what was effectively my business and his. Frankly she had no experience in our business and as far as i was concerned could mind her own business to put it very politely. so yes if 3 partners have $150k invested each in the business the last thing you would want is for all assets to be frozen for months on end...and construction orders/sales to go waiting!!!!!!!!!

my questions
is this legal??

• can you effectively via a shotgun contract remove your heirs'/family's right to monies/assets invested in this business by the deceased?
• is this common practice in the DR within business relationships

if its a little unclear im sorry, the conversation took place over a couple of pina coladaaaaassssssssss!!!!!!!!!!
MrGuzman you input is very welcome here

[MommC]

In Canada one usually carries insurance to protect the business should one of the partners die. The insurance effectively 'pays' the value of the partners share in cash to the heirs (money can be placed in a trust account until the rightful heirs are sorted out) so the business is not disrupted.
Sometime called 'key' person insurance.

[Fabio J. Guzman]

The standard solution to the problem is to provide for a buyout by the surviving partner of the deceased partner’s interest at a preestablished price or at a price to be determined depending on objective parameters, usually payable on very generous terms, or as Momm commented, on a cash basis but with the proceeds of a life insurance policy.

[planner]

This is referred to as a buy/sell agreement. Using life insurance you provide a source for the funds on death. Also this agreement can set up the requirments should one partner be incapacitated or simply choose to get out of the business. It can also take into consideration the stipulations should a disagreement occur between partners. IN advance it sets out the dissolution formulas for the business.