Buy-Sell Agreement Funding
Protect Your Business When an Owner Passes Away
Protect Your Business When an Owner Passes Away
If you own a business with someone else, what happens to their share of the company if they unexpectedly pass away? A Buy-Sell Agreement funded with life insurance can help provide the money needed to purchase a deceased owner's business interest helping protect the surviving owners, the business, and the deceased owner's family.
What Is a Buy-Sell Agreement?
A Buy-Sell Agreement is a legal agreement that establishes what will happen to an owner's share of a business after certain triggering events. One of the most important events to plan for is the death of an owner.
The agreement can establish:
Who can buy the ownership interest
Who must sell
How the business will be valued
How the purchase will be funded
Life insurance can provide the money needed to help complete the purchase after an owner's death.
How Does Life Insurance Help?
The agreement establishes what should happen.
Life insurance helps provide the money to make it happen.
Business Owners Create a Buy-Sell Agreement
The owners work with their legal and tax professionals to establish the terms of the agreement.
Life Insurance Is Purchased
Life insurance is obtained on the participating owners according to the structure of the agreement.
An Owner Passes Away
The death triggers the terms of the Buy-Sell Agreement.
The Life Insurance Death Benefit Is Paid
The appropriate policy beneficiary receives the death benefit according to the policy.
The Ownership Interest Is Purchased
The funds can be used according to the agreement to purchase the deceased owner's business interest.
The Business Continues
The surviving owner or owners can continue operating the business while the deceased owner's family or estate receives value for the ownership interest according to the agreement.
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