The answer is to plan for the business to continue after the death of the life insured. This requires action whilst the business is stable. Life insurance companies offer buy/sell agreements. The owner nominates someone to carry on running the business after death. The idea is that the parties agree a fair price for the sale when business is good. Firesales never produce good returns. There is no guarantee that the business itself would have enough liquid cash to buy out the deceased’s interest.

Almost everyone understands the idea of life insurance. You pay a premium. When the life insured dies, the insurance company pays out to the beneficiaries. Often, family members do not want to see something that has been important to them sold up and dissolved. Pride and a sense of responsibility to employees complicate matters. In the case of a corporation, the other shareholders face problems of uncertainty in not knowing who will control the shareholding and potentially want to come in and run the business.

But if an acknowledged business value is set for federal estate tax purposes and inflation-proofed, the buyer insures and links to the buy/sell agreement. Upon death, the insured value is paid to the business and used by the nominated individual to buy out the deceased’s interest. Whichever permutation you put in place, the business can continue in exactly the way you want whilst still releasing cash to help provide for your family. All it takes is planning effort now. Talk to your insurance agent about the options and look for life insurance online quotes in the internet.

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