Death and taxes. The only two guaranteed events in your life that can be planned from your infancy. But what about death’s tax on life, also known as disability? If you are a small business owner, all of the aforementioned events can completely sideline and even bankrupt a company if you fail to recognize and plan for them.

Buy-Sell Agreement and Privately Owned Life Insurance

I find most intelligent business owners understand the life insurance portion very neatly, my family needs income if I die. A Buy Sell agreement is using that same vehicle to solve a different problem, my business needs to be bought or sold if I die. If you have not yet satisfied this concern, STOP HERE and call your local financial hero. Life insurance funds the replacement of income and estate tax liabilities. A efficient buy sell guarantees a just ending to your responsibility in the business for your loved ones and your business partners, the two should always be separate.

Key Employee Disability

The same way a life insurance or Buy Sell plan funds the transfer of income and assets to loved ones or business partners, a Key employee disability plan funds the disruption in profits likely to occur due to the absence and medical care a disability demands. Payment will be made upon diagnosis to the business itself, at which point owners and officers within the company direct the usage. This funding will go directly to the business itself for a given period of time or the entire period of absence, usually tax free. This type of benefit is not to be confused with a long term care, critical illness or employee disability policy. These types of policies are paid directly to the medical provider to satisfy care charges or to the employee covered and not to the business.

Some fancier companies and fancier advisors can actually bundle a Key Employee or owner Buy Sell with Key Employee disability into the same policy. This will often result in greater premium savings and timeliness of the claims process. Again, consult your local hero if this was never explored in your process.

The tax concerns and advantages of having addressed these needs are inherent with a good advisor’s planning process, in other words one can not be properly done without the other. If there are tax implications or liabilities that you do not feel you fully understand involved in your business succession plan, you must hold your advisor accountable to getting that understood as soon as possible.

As a risk mitigation specialists, Bay Life not only enjoys this type of financial planning but seeks it out. If you find yourself having lacked any of the above conversations in regards to your business, then you should seek us out.