Let’s address a question about when your partner is unable to sign on behalf of the entity, what happens then?
Let’s say one of your partners, named T, passed away prior to the closing of your relinquished property and he is unable to sign on behalf of the entity. If T had a will or estate documents prepared before his departure then whomever designated in the said documents would have the right to sign and the exchange would be able to proceed forward.
However, if T does not have a will or any estate documents prepared, then the laws of the state in which the relinquished property is located, would govern the resolution to this situation. For example, in Texas, if there is no will, the deceased partner’s spouse or significant other typically gets the deceased’s assets and can sign on behalf of their ownership interest in the entity. This is where the signing would vary on a state by state basis.
Another potential solution could be if T had previously transferred his ownership interest to the surviving partner, J, through a notarized affidavit and if the said affidavit exists, J can present this document to proceed with the 1031 exchange without any further delay.
It is advisable to consult with a licensed attorney in the state the relinquished property is located in to understand the business and commerce codes of the state and to have any “backup” plans with regards to your company set in place from the day of formation or incorporation.