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As a partner or co-worker of a business, you’ve spent years building a valuable financial interest in your company. You may have considered setting up a buy-sell agreement as a funding method to ensure your surviving family a smooth sale of your business interest. One of the first methods you should consider is life insurance. The life insurance that funds your buy-sell agreement will create a sum of money at the time of your death, which would be used to pay your family or your estate the full value of your ownership interest.
There are many advantages of using life insurance to fund a buy-sell agreement. Life insurance creates a lump sum of cash to fund the buy-sell agreement at death. Life insurance proceeds are usually paid quickly after your death ensuring that the buy-sell transaction can be settled quickly. Life insurance proceeds are generally income tax free.