I certainly don’t want to be seen as jumping on the pro excessive pay band wagon for executives, CEO’s and Presidents of companies, but there are some company financial health issues that can and should be addressed in the life insurance arena.
It happens daily in America. Whether it is a small partnership or a large company with a multitude of shareholders, an untimely death can send a company into a tailspin and into a place where, with proper planning, they didn’t have to go.
If the President of a company or a major shareholder of stock passes away, a company needs to be poised to be able to buy back that stock. Buying the stock back ensures that the company will keep remain stable. Failure to buy the stock back can leave wide openings for power struggles, or if enough shares of stock are at risk, a company takeover.
With life insurance and a stock repurchase plan in place, there is no question as to any loss of control of the company. The company absorbs those outstanding shares and the family of the deceased is paid a fair market value for the stock.
This can be even more critical in a small partnership where most state’s laws would allow a surviving spouse or member of the family to actually move in and become part of the business if they weren’t bought out. If a proper buy/sell arrangement is in place, fully funded by life insurance, the surviving partner has the ability to buy out the deceased partner’s share of the business.
Life insurance is an attractive way to enhance a bonus package for members of a company board of directors. Generally this is an unpaid position where the person or their survivor might get some amount of stock for their years of service. In a best case scenario if the company were to carry life insurance on the board member they could use the proceeds from that to buy the shares of stock back from the surviving spouse.
Bottom line. The death of the wrong person at the wrong time in a company can create a real crisis. A funded life insurance plan can be the salvation of the company and the family of the person who passed away.