PremFinance.com - Life Insurance Financing For High Net Worth Individuals
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When a partner in a business dies, the disposition of his or her business interest can create many problems for his heirs as well as the remaining partners. There are many important issues that have to be dealt with. Who will purchase the shares of the deceased? What is a fair price for his shares in the business? Where will the funds come from?
These problems are easily resolved if a buy-sell agreement has been established.
A buy-sell agreement provides that:
• Someone (e.g., the business entity, key employee, or the surviving partners) will purchase the deceased owner's shares at an agreed-upon price.
•The deceased owner's estate is obligated to sell the shares at that price.
Let us use an example to illustrate the need of a buy-sell agreement.
Berman Carpet Manufacturers is a partnership with three owners; Bill, Howard and Stanley. If Bill was to pass away his shares in the company would be passed on to his son Harry. Harry does not have experience in running the business and neither Howard or Stanley like the idea of sharing the company with him. It is similar to assume that if one of the other two partners passed away, Bill would feel the same way about their heirs. Setting up a buy-sell agreement will insure the remaining partners that they will attain full control of the company. It also assures the deceased that his heirs will receive a fair price for his shares.
Where will the funds come from?
All that remains are the funds to purchase the deceased shares. Having to suddenly liquidate a large part of the business to pay off the heirs of the deceased can be very damaging to the company. Using our Life Insurance Premium Financing Program a life policy can be taken out on each eligible partner. In the case where a partner passes away the death benefit will help pay for his shares in the company. With no money to lay out and very minimal risks our Life Insurance Premium Financing Program is a strong opportunity to help partnerships plan for the future.
If you have any questions about the program please feel free to email us.
