In a cross-purchase agreement, who buys the deceased partner's interest?

In a cross-purchase agreement, it is the surviving partner who buys the deceased partner's interest. This type of agreement is set up to ensure that when one partner in a business dies, the remaining partners can buy out the deceased partner's share. The funds for this buyout typically come from life insurance policies taken out on the partners, where each partner holds a policy on the others. This arrangement avoids having to involve external parties or the deceased partner's estate in the business continuation, allowing for a smoother transition and continuity of the partnership.

The other choices do not fit the scenario of a cross-purchase agreement. The partnership as a whole would imply that all partners collectively own the interest, which contrasts with the individualized nature of a cross-purchase arrangement. The deceased’s family would not typically take over the business interest, as the purpose of a cross-purchase agreement is to transfer the interest directly to surviving partners rather than the deceased’s estate. The state of residence also has no role in this type of agreement regarding the ownership or transfer of a partner's interest in a business.