Business protection
Today. You have created a successful and profitable business and your family enjoys a comfortable lifestyle. Tomorrow. You sustain an injury, forcing you to cease work immediately, or, in the worst case scenario, suffer premature death. What next? Your family and other stakeholders face critical decisions.
What are your options?
Option A - The next of kin becomes active in the business. However, do they have the experience, skills and expertise to manage the business?
Option B - The business (or a share in the business) is sold to an outsider, or the next of kin retain their interest as inactive shareholders. However, can the other stakeholders accept this arrangement with the extra effort required of them for no extra reward in terms of profit share?
Option C - The next of kin want to sell their interest to the remaining shareholders. However, will these shareholders be able to raise the necessary funds for this transaction?
A succession plan
Every business should have a succession plan in place, even if a transition, retirement or sale is not a current prospect. Business owners don’t think twice about insuring their businesses against fire and theft.
However, there are numerous other circumstances that can threaten the viability of a business.
Life Assurance for Limited Companies and Partnerships; A life assurance policy put in place by a company or shareholders to provide the necessary funds to purchase the shareholding from the estate of a deceased shareholder or partner.
Life Assurance for a Key person; A life assurance policy put in place by a company on a key employee to compensate the company for the loss of the key person or to repay business loans in the event of the death of the key person.
How will we assist?
Please note real names have been changed for confidentiality.
Patrick and Erica have 2 children. Patrick owns a business with Jon valued at EUR 500,000
We sat down with Patrick and identified that his spouse Erica would require EUR 700,000 if he should die unexpectedly, to maintain the family's current lifestyle and provide adequate money to support the children to age 23.
We helped Patrick and Jon formalise what would happen to their business in the event of either of their deaths (before they intend to retire).
They both agreed that on the death of one of them, the other partner (survivor) will buy back the deceased partner's share of the from his next of kin. They put a legal agreement in place to do this (with advice with their legal professional/Solicitor). We met and discussed our advice with this professional with our clients.
There is now a protection plan in place i.e. life insurance, that will pay EUR 250,000 to the surviving partner - if either partner dies.
So, if Jon dies, Patrick receives EUR 250,000 and uses it to buy Jon's share of the business from his spouse. Alternatively, if Patrick dies, Jon receives EUR 250,000 and uses it to buy the share of the business now owned by Erica.
On Patrick's death; Erica would be certain to receive
- Lump sum life insurance of EUR 700,000 to cover lost income/costs of education etc and provide for her family
- Lump sum from business insurance EUR 250,000
Want to know more? We are available to discuss your options, and we look forward to hearing from you.
Our job is to help you choose a product and structure that will help you meet your goals.
telephone | 091441188 and/or email | office@nelsonlife.ie
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