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 ...

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Do You Have Enough Life Insurance?

Here is the scenario.  Your husband is driving home that night on the local highway.  Out of nowhere a large truck sideswipes the car sending it reeling off the road.  After the car does a couple of flips and comes to a rest, emergency vehicles arrive on the scene only to realize that they are too late. Your husband is pronounced dead on arrival. As the chaos unveils, it is learned that the driver of the truck was heavily under the influence of alcohol at the time. He lost control of the truck driving at an excessive speed when he inadvertently hit your husband’s car sending him to an early death. As you learn more facts about the case, you decide that there is only one option.  That is to file a lawsuit against the trucking company. The big question then becomes . . . what amount do you sue for in court? Many times in the financial planning process ...

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