Life insurance is purchased in a business on partners.
Creating and implementing a business succession plan will provide several benefits to owners and partners:
It can ensure an agreeable price for a partner’s share of the business and can eliminate the need for valuation upon death because the insured agreed to the price beforehand.
The policy benefits will be immediately available to pay for the deceased’s share of the business, with no liquidity or time constraints. This effectively prevents the possibility of an external takeover due to cash flow problems or the need to sell business or other assets to cover the cost of the deceased’s interest.
The death benefit proceeds will be used to buy out the deceased partner’s share of the business and distribute it equally amount the raining partners.
A succession plan can greatly aid in allowing for timely settlement of the deceased’s estate.