Succession Planning

Succession Planning

We are experienced at working with business owners to determine financial planning and insurance needs to help ensure a smooth transition upon retirement or death. You have put extraordinary effort into building your business, and we can help preserve and grow your success and make sure that it continues successfully to the next generation and beyond.

Insurance coverage is available for every conceivable risk your business might face.  Below are some examples of how we have helped other businesses.

Loss of key persons. If a key person involved in a small business dies or becomes disabled, it can seriously disrupt business operations and profits. Banks may pull back lines of credit, suppliers may require payments upon delivery, and customers may hesitate to place orders if there is a chance the business won’t survive. A type of life insurance policy, key person insurance, provides cash to replace lost profits or to find a replacement for an employee with a particular skill, talent, or contacts. Key person insurance can also be used to repay business loans.

Buy-sell agreements can provide stability for your business in the event of your death, disability, or retirement. A properly structured agreement can guarantee a buyer for your business interest, establish the taxable value of the business, create liquidity for estate taxes, improve creditworthiness of the business, and help to maintain the business’s legal status.

Although a buy-sell agreement has many benefits, it also may place restrictions on your ability to transfer your interest to parties outside of the agreement or leverage your business interest as collateral for outside credit. You’ll also want to be sure that your buy-sell agreement is properly funded by a means such as life insurance, disability insurance, or cash borrowings.

There are several different variations of a buy-sell agreement.  Let's look at one typical example.

Example 1: The entity-purchase agreement

An entity-purchase agreement is a buy-sell agreement between the business itself and the owners of the business. Upon a triggering event (e.g., an owner’s death, disability, termination of employment), the business agrees to purchase the interest of the departing owner at an agreed-upon price. Insurance is a typical source of funding for this type of agreement. In the case of insurance funding, the business purchases insurance on each of the owners and becomes both the owner and beneficiary of the policies. The business then uses the proceeds from the policy to purchase the business interest from the departing owner’s (Owner A’s) estate.





Succession Planning




Example 1:  Buy Sell Agreement - Entity Purchase


Buy Sell Graphic