I recently spoke with a colleague who relayed a tale of woe about a business owner he knew who passed away recently. About 5 years ago the deceased (Partner A) and his business partners (Partners B and C) decided it would be a good idea to get some life insurance to fund a buy out in the event that one of them died. The business was growing and they were worried about raising the money to buy out a deceased partner. The intention was right…
They met with their insurance broker who organised quotes for the appropriate policies. He also organised an extra policy for the deceased to go directly to his spouse upon death. The partners organised to see a Solicitor to draw up a Business Will. Unfortunately they never went ahead with the insurance or the Business Will.
Partner B died about 2 years ago. As he did not have a Personal Will he died intestate and it has taken this long to get the insurance payout of the extra personal policy to his wife. This would have occurred much quicker if he had a valid Will.
Worse still, Partners B and C have to come up with about $6M to pay out the wife of Partner A. Guess what – they don’t have the money and can’t raise the finance! If the insurances and Business Will were put in place then the buyout would have occurred smoothly; Partners B and C would own the business without debt; and the wife of Partner A would have the proceeds of the business policy. Instead they are all now far worse off.
This story should prompt every business owner to review their personal and business circumstances and agreements. Death is inevitable and something that should be discussed.
For any queries or questions about your personal or business circumstances, including Business Wills, please feel free to contact me.
Tagged in: asset protection, business agreements, business buyout, business circumstances, Business Insurance, business partner passing away, business policy, Business succession, business wills, deceased business partner, dying intestate, estate planning, insurance payout, Life Insurance, personal policy, Succession Planning, valid will