Farm Table says:
Have you ever thought of using life insurance as a tool during the succession planning process?
Vanessa Williams explains that insurance can enable your child involved in the business to buy your share of the business from the estate. If you had one other child who was not involved in the business, a policy could be owned by that child to the value of equity your other child has in the business.
She explains that if one partner/shareholder dies or becomes disabled the following occurs:
- The deceased estate agrees to sell the share in the business.
- The partner/shareholder still actively involved in the business agrees to buy the other person’s share.
- A price for that share has already been agreed upon.
- Funding for the purchase is created by way of the life insurance policy on the deceased/disabled partner/shareholder owned by the surviving partner/shareholder.