Needless to say, these kinds of events can definitely present you with some challenges. Partnerships are tricky enough. Without the right business life insurance or buy/sell life insurance policy in place, the partnership can remain tricky long after the deceased partner is gone.
In general, a business partner’s portion of the business would be passed on to his or her family upon death. This can take place in a few ways.
One scenario is that the spouse or a surviving child of your partner would move into the partner’s old position and continue on kind of like nothing ever happened. A problem can arise if that spouse or child isn’t qualified to do the job, in which case you would probably prefer they weren’t there. A problem can also pop up if their aren’t any family members who want to step in, but they can’t afford to just walk away from the income generated by the half of the partnership they used to enjoy.
A buy/sell life insurance policy, usually a term insurance policy, can alleviate the problem. Each partner would carry an amount of insurance adequate to buy out the other partner’s portion of the business. That would provide the funds necessary to formally purchase the partner’s interest in the business from the deceased partner’s family.
So, what happens if your business partner wakes up dead today? Before that happens, get together with an independent life insurance agent and get some life insurance quotes today. Discuss a binding agreement with an attorney. You’ll be surprised how a little money can defuse a potential time bomb.
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