When people consider buying a life insurance policy, they’re usually thinking of providing for their spouse and children in the event they pass away. But, if you’re a business owner, you need to know what life insurance can do for you. The first step is to envision what you’d like to have happen to your business if you passed away unexpectedly.
If Your Loved Ones Will Take Over
If you plan to pass your business on to family members, a life insurance policy can be essential in shoring up cash shortfalls during the transition. It can also provide your family members with much-needed liquidity for paying estate taxes or debts, so that there’s no threat of your business being sold to meet these obligations.
If The Business Will be Sold
If your plan is for your loved ones to sell your business after you pass away, life insurance might still be essential. For example, the same concerns about taxes and debt apply, so you’ll want to make sure there’s liquidity during the estate settlement process. Plus, your business likely won’t sell immediately, so there will need to be funds available to keep the business operating until the transition can be made. You’ll want your loved ones to be able to take their time and accept the best offer, instead of being rushed to take the first offer that comes along.
In addition to being properly insured, it’s essential that you have a well-thought-out succession plan in place. This will help to guide your loved ones and ease the transition in the event of your death. An estate planning attorney can help you assess your needs, and put together an effective succession plan.