Life Insurance for Buy Sell Agreements in Florida

You and your business partner have built a solid, successful business. You work hand in hand to engineer this success. What would happen if one of you died?

In most cases, the deceased partner's spouse would inherit their portion of the business and you would have a new partner. There would be a strong probability that this new partner would not have the same talents and strengths your deceased partner brought to the table. There is also the possibility that you may not get along at all! What can you do?

The best idea is to anticipate this scenario and plan accordingly. A great way to do this is with a Buy-Sell Agreement funded by Life Insurance. It works like this.

First you and your partner set a value for your company and each of your share of the company. Each partner buys a life insurance policy insuring the other, with a Death Benefit equal to their share of the company. If one partner dies, the Life Insurance policy pays the death benefit to the surviving partner. The surviving partner uses these funds to purchase the deceased partner's share of the company from his heirs. The surviving partner avoids a new partner who may not have the talents and work ethic of the deceased partner, while the deceased partner's family is paid for his or her part of the business.

For example, John Brown and Betty Blue each own a 50% share of the Colors Company. John and Betty agree that The Colors Company has a value of $2,000,000. John and Betty draw up a Buy-Sell agreement that states that, if either one passes away, the surviving partner will buy the deceased partners share of the business for $1,000,000. In order to fund this agreement, The Colors Company buys a $1,000,000 Life Insurance policy on John, and another $1,000,000 policy on Betty. If John dies, the Death Benefit will allow Betty to pay John's heirs $1,000,000 for his share of the company. Betty owns her company free and clear and John's family has $1,000,000 in Cash. A win-win.

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