Business Life Insurance for Partners and Succession Planning

When you go into business with other people, it’s important to stop and think about what might happen in the event that you or one of your partners passes away. It’s one thing to start and run a small business with a particular person that you know and trust, but it’s another matter entirely to find yourself owning and operating a business with one of your partner’s heirs in the event of his or her death. However, if one of your partners dies and you haven’t done proper succession planning (a legally binding agreement about what will happen with his or her stock shares), that’s exactly the situation you’ll face.

That’s why it’s so important to have solid, sound buy-sell agreements in place as soon as you take on a business partner. When you go into business, you’ll want to draft a legally binding document that specifies exactly what the partners can and cannot do with their stock. If the partners agree that stock should not be assigned to heirs, the agreement will stipulate that the corporation will buy back outstanding shares in the event of an owner’s death.

Of course, it’s important to have a guaranteed source of funding, so you won’t have any problem buying back your partner’s stock from the estate should the agreement need to be enacted. That’s why business partners and life insurance for business owners go hand in hand. It’s important to take out a key person insurance policy on each of your company’s partners. With proper life insurance in place, there will be no worries about how to enact the buy-sell agreement should the need arise.

Key Person Insurance

When you go into business with partners, you and your co-investors are very dependent on each other — in terms of both finance and a shared workload. Whether your company is just starting or you’ve been in business for years, it’s important to make sound decisions about business partners and life insurance. When you take out key person life insurance policies on each partner, the company will receive a lump sum life insurance payment in the event that one of the covered individuals dies.

Typically, surviving partners use proceeds from key person insurance policies to purchase outstanding stock shares per the terms of the company’s buy-sell agreement, to hire someone to handle the day-to-day duties performed by the deceased partner, and to take care of other operating expenses. When thinking about whether or not you can afford key person life insurance, it’s important to stop and ask yourself, and your partners, if you can afford to go without this important protection.

Article source: http://www.lifeinsure.com/blogsuccession-planning/

Before you start storming the castle with pitchforks and torches, I am not talking about the intangibles a mother’s brings to one’s life, and I certainly wouldn’t be bringing it up a couple of days before Mother’s Day.  Having lost my mother a few years ago, there isn’t a day that goes by that I’m not reminded how much she meant to me in my life.  Years later, there are still times I want to call her to ask her a question about something or other.

What I’m talking about here is the salary a mother should receive…if she were actually getting paid for being a Mom and taking care of the home.  From a life insurance perspective, the jobs Mom does around the home would need to be done if she were to pass away, so the surviving spouse would have to hire a person or people to wear all the hats Mom wore.  The proceeds from a life insurance policy would go toward paying the person(s) who do those jobs.

So what is a Mom worth?  According to the 2013 survey done by Salary.com, the average salary for a stay-at-home Mom, based on the her “jobs” and hours worked (94 hours on average), should be $113,586.  Mom’s who work outside the home would be earning $67,436 annually for her in-home work (an average of 58 hours)…on top of the salary she’s earning outside the home.  Either way, Mom is working an average of two full-time  jobs.

Salary.com has put together a Mom’s Salary Wizard to calculate Mom’s salary and create a “Mom Paycheck” for Mother’s Day.  I’d say, based on these statistics, that it would be a great idea to show your appreciation to your mother and/or wife this Mother’s Day.  As you can see – she clearly deserves it.

You also might want to look into getting some life insurance quotes for your wife on this website and tell her, while she can never be replaced, if something should happen to her, the family would be able to maintain the lifestyle she works so hard to create.

Happy Mother’s Day to all your beautiful Mothers everywhere.

Article source: http://www.lifeinsure.com/mothers-day-question-whats-a-mother-worth/

When you purchase a life insurance policy, you must name the person, persons or entity (e.g. trust) that will receive the death benefit of your policy upon your death.  The amount of unclaimed death benefits in the U.S. is staggering.  In an article titled “How to Find Lost Life Insurance Policies” in the February issue of ConsumerReports.Org, it is estimated that at least one billion dollars of life insurance death benefits are waiting to be claimed by  policy beneficiaries.  We addressed the topic of unclaimed benefits in an earlier post, Will Your Life Insurance Benefits go Unclaimed?, so we won’t dwell on that aspect here.

What I do want to address, however, is how to prevent this from happening.  The first way is to designate your beneficiary wisely.  The purpose of a well-drafted beneficiary designation for a life insurance policy is to provide information that will allow both:

• A clear identification of the beneficiaries; and; 
• Fulfillment of your intent with respect to how the death benefit will be paid.

And to make sure your beneficiaries won’t suffer the fate of the unclaimed benefits mentioned  above, a clear, concise designation allows the insurance company to pay the claim settlement quicker than a designation that leaves room for interpretation.

It’s important that the beneficiary designation coordinate with your overall estate plan. Keep in mind that beneficiary designations usually supersede instructions in a Will as to how the benefit is to be distributed.

Bear in mind that major life changes might occur, such as the birth of a child, a divorce, the death of a beneficiary that could affect your original intent. This is why it is important to review beneficiary designations regularly with your agent/broker, hopefully in an annual policy review, and make sure they are still appropriate.

Remember the following tips for naming beneficiaries:

• Include both the name and identifying information of the beneficiary, such as their relationship, last four digits of their social security number, date of birth and address. Some states require that the life insurance companies also ask for this information when making changes to the beneficiaries. There is a great deal of scrutiny insurance companies are facing for their ability to “find” beneficiaries of life insurance policies.
• When naming multiple beneficiaries and their shares are unequal, use percentages or fractions. Do not use dollar amounts.
• Children may be named individually or a part of a class. For example, “All children of the insured living at the time of the insured’s death, equally or to the survivors.” Make sure the designation allows for adopted children or stepchildren, if appropriate.
• When naming a trust, provide the full name of the trust, the date the trust was enacted, including month, day and year and the name of the current trustee(s). A full copy of the trust document will be requested at the time of the change.

So, name your beneficiaries wisely to ensure that life insurance  policy you purchase will serve the purpose you intended – to pay a benefit to those you leave behind.

Article source: http://www.lifeinsure.com/blog/name-your-beneficiary-wisely