Having a life insurance policy in place is one of the best ways to ensure your family’s financial well-being after you pass. However, it may not be only family members that require financial support in your absence. If you are a small business owner, you should strongly consider taking a policy out on yourself that will act as part of your succession plan. Below are two examples of how having a life insurance policy specifically designated to the succession of your business can be used to benefit those you leave behind.
Much thought is put into estate planning on a personal level, but if you are a small business owner, it’s important to predict the business estate taxes to be paid upon your death. Discussions with a financial advisor will help you through this process as there are many factors involved in determining how much of the business will be taxable when the business owner dies. If the business was financially successful, there could be a large tax bill requiring payment as part of the estate settlement. This is when a specifically designated life insurance policy can really save your successor. Designate in your Will what each insurance policy you hold is to be applied against to ensure no confusion if you happen to meet an untimely death.
Replacement of Talent
In a small business situation, the business owner often plays a vital role in the day-to-day operations of the company. If the owner was there at the inception of the business and has spent years mastering the business, it will not be an easy feat to replace that person if they should die unexpectedly. People can pass away without notice, and if the survival of their company depends on their specific job being done, then existing staff may need to seek outside help. Having a life insurance policy on the business owner who carries the business is a useful tool for hiring a replacement. Likely someone with the expertise to successfully run a company will come at a higher salary, and having the financial means accessible to fund that salary could mean the difference between the company sinking or the company continuing to thrive.
Life insurance policies are important to have to ensure your family is cared for after your death. However it’s imperative that you also remember to protect your company against financial ruin after your death. Be certain to have enough life insurance in place to cover any expenses associated with your passing. We would be happy to provide you with further information about securing your legacy.