Life Insurance-Business Owners-Succession Plan-Selling Company

Posted on February 15, 2015 by

Based on my experience of handing life insurance for business owners throughout Texas, I have decided to share the following information as both a warning and an encouragement for my fellow business owners. I want you to be aware of  factors to consider concerning your life insurance policy.

As a business owner, you have worked hard to build your business or businesses. What will happen when you are no longer able to run your business either because of death or some debilitating health issue?

Your situation is much different for you than for an individual whose income is not determined by their actively running a business that produces most or all of their family’s income.

You need a life insurance policy that will insure that your family is taken care of, while at the same time making sure that they are able to take care of the ownership changes for your business.

There are many factors to consider, whether you need to consider succession planning, the transferal of ownership to the next generation, or the transferal of ownership to a person or persons outside of your immediate family.

Some Costs Involved…

  • Attorney
  • Court Costs
  • CPA
  • Financial Planner

How will you create a fund for your family to more easily deal with this situation? The only viable answer for your family having to deal with this is by providing them with the right life insurance policy.

At this emotional time, there is often friction between family members who are actively involved in the business and those members who are not involved.  By having a death benefit for un-involved family members equal to the value of the share of the business that you leave to involved family members will minimize that friction.

The right life insurance for you as a business owner will also protect your family from having to do what is referred to as a “distressed sale” of your business. If you have used your personal assets as collateral, the right life insurance policy will negate the necessity of your family having to quickly sell the business to cover loan obligations. This quick sale in many cases would cause the business to be sold for a sum that is considerably less than its actual value.

There may be other funding available, but the right life insurance policy will provide both the flexibility and tax benefits that are missing from other funding options.

Your life insurance policy should also provide uninterrupted liquid income during this time, to take care of …

  • Funeral expenses
  • Gratuity for Clergy
  • Estate Taxes
  • Meals for family and guests
  • Possible transportation for out-of-town children or other close relatives
  • Normal family bills.
  • And more unexpected out of pocket expenses

My hope is that this information has made you aware of factors that you, as a Texas business owner need to consider in choosing a life insurance policy.

Posted in Life Insurance, Small Business Insurance, Small Business Owner, Succession Plan, Texas Life and Health Insurance | 0 Comment