fbpx

Personal Finance 101 – Funding Your Buy-Sell Agreement

Part of any good business plan is an exit strategy if the unexpected happens.  A good Buy-Sell Agreement should anticipate certain unfortunate but foreseeable events, and make sure a fair and reasonable plan is in place. When a triggering event occurs, everyone should be fully comfortable and prepared to move forward with the plan. The most critical detail of the Buy-Sell Agreement to the company’s survival is how to pay the purchase price for a departing owner’s interest.  If the company or other owners do not have adequate assets, cash reserves, or credit available to fund the payment obligations, then they cannot fulfill their side of the agreement.  This isn’t good for anyone – the departing owner (or his estate and family), the company itself, or the remaining owners. Insurance. Since death and disability are two of the most basic triggering events in any Buy-Sell Agreement, life and disability insurance can be the most attractive methods for funding the payment ...

Read More →

Personal Finance 101 – Who Buys The Business?

Part of any good business plan is an exit strategy if the unexpected happens.  A good Buy-Sell Agreement should anticipate certain unfortunate but foreseeable events, and make sure a plan is in place that is fair and reasonable for the owners and the business itself.  One important detail to include in any Buy-Sell Agreement is: Who has the right to buy an owner’s interest after a triggering event occurs?  There are a few main options discussed below. Redemption. In a Buy-Sell Agreement using the Redemption structure, the business agrees to purchase (“redeem”) the interest of an owner after a triggering event.  The owner agrees that he, or his estate, will sell the business interest back to the business for the agreed price.  The main advantage of the Redemption approach is that it is usually the simplest form of buy-sell transaction, and when there are many owners involved, the simplest structure can sometimes be the best. However, there are certain key ...

Read More →

Personal Finance 101 – What Is A Buy-Sell Agreement?

For many business owners, the value of their business is one of the largest components of their overall net worth, and the business itself is the result of years of hard work and investment.  Most business owners want to preserve the built up value of the business for themselves and their family while also ensuring that the business legacy they have helped create continues for years to come.  The best solution is a well-considered Buy-Sell Agreement. A Buy-Sell Agreement is a contract entered by owners of a business that specifies when and how ownership in the business will be sold or transferred.  The agreement can be a stand-alone agreement or incorporated into a partnership or operating agreement for your business. Buy-Sell Agreements are not “one size fits all”, so careful attention should be given to the details. Most business owners have heard of the importance of a good Buy-Sell Agreement, but many push this planning to the “back burner” to ...

Read More →

Personal Finance 101 – How do I protect assets for my kids?

How do I protect assets for my kids after my spouse and I die? If your kids are still minors, then the laws in your state likely prevent them from owning property until they reach a certain age (usually 18), so a legal representative must be appointed to manage the assets left to the kids. There are a couple options you can choose from that can protect assets for the kids. First, you can nominate a “Conservator” (sometimes called a Guardian for property) to manage assets on behalf of any minor children inheriting property from you. You can nominate the Conservator in your Last Will and Testament, or, if you don’t have a Will, the courts will appoint a Conservator since someone must manage property for the minor children. While the assets are held by the Conservator, they are generally protected from creditors, but state laws can also limit how easily the assets can be accessed for the benefit of ...

Read More →

Personal Finance 101 – This Week: Do I need a Living Trust?

First, a Living Trust is a trust you set up to hold your property and to govern the use and distribution of your property during your lifetime, during any period when you are incapacitated, and even after your death (when it acts much like a Last Will and Testament). You can amend or revoke a Living Trust at any time during your life making it a very flexible planning tool. Due to their broad scope and flexibility, Living Trusts are often viewed as one of the most comprehensive estate planning documents. But do you really need a Living Trust? If you answer YES to any of these questions, you may want to consider one. 1. Do you own property in multiple states? After you die, your family or other legal representatives must go through the probate process in each state where you own property in your name. The time, hassle and expense of probate in multiple other states can be ...

Read More →

Personal Finance 101 – This Week: Dying Without A Will

What happens if I die without a Will? First, a little context is required. If you own any property when you die, then your surviving spouse or family will need to go through a legal process called “Probate” in order to legally wind up your affairs, pay off your debts, and transfer your remaining property to surviving family. The Probate process applies whether you have a Will or not. The only way around the Probate process is to own all of your assets through a Living Trust, but that’s a whole different story… If you have a valid Will, then the Probate process plays out according to the specific wishes in your Will, which should include details about who is responsible for administering your estate (the “Executor”), who is guardian for your minor children, who gets your assets, and whether those assets are left outright to people or in creditor protected trusts, just to name a few considerations. After that ...

Read More →