Managing the Financial Risks in the event of death

Financial Solutions in the event of death

Financial Solutions for your business in the event of a Death or Disablement of a partner or key person.

We all know that a business can be badly affected by a Fire or following a Storm, what about if one of the key partners was to be killed or badly injured in an accident?

All Risk Management plans need to not only prepare for physical risks, but also for that unexpected tragedy that could hit a vital member of the business, how the business will cope with it and how will that key person’s family continue to feel financially secure.

To protect your business from the ramifications of such an event should not be left with lawyers representing many different parties sorting it all out after the event.

As we always say, “if you fail to plan, you plan to fail”!

Why do you need it?

Without such insurance protection, alternative funding arrangements for the shareholders would include, business loans, possible surplus business funds from the estate, have business assets liquidated, a personal loan, liquidate some personal assets, having to make installment payments to the key person’s estate or continue to share profits (possible losses) and control with the key person’s estate even though they have not contributed to the business or sell to a third party buyer.

The alternative situation without a plan is to wind up the business, or their estate could take control of the key person’s share, or sell to an outsider without the other partners or shareholders having any input. Perhaps the shareholders could sell their shares to the Key Person’s estate. Or perhaps the remaining shareholders could buy the deceased key person’s share from their estate but finance could be limited.

Who can help?

You need the services of a specialist who can work with you to put in place a plan for such a crisis. An experienced specialist in conjunction with a specialist lawyer can assist with developing a Succession Document including a Buy or Sell Deed, to deal with a Death of a key person in the business or their becoming disabled, Retiring and even Divorce or Resignation.

To back this up, a Life, Total Disablement and Trauma policy on the life of the Key Persons that factors in one or two year’s salary. Policies can be designated also to Business Loan Payout be it in the event of either the Key Person’s death (or becoming disabled and/or being diagnosed with a critical illness). Or the insurance proceeds could be paid to the Key person’s estate and in return, this estate would be compelled to release their shareholding in the business to the other partners.

For business, insurance policies can be structured so that the proceeds may be paid into the business itself to assist with cash flow and help with additional costs such as recruitment costs to replace the skill of the key person. Or even insurance proceeds would be paid into the company’s solicitor’s trust account to pay off an outstanding loan to the bank and ensure all 2nd mortgages and personal guarantees are released.

Who do you call?

I know specialists in this area who would be able to help you further. Please let me know and I will ask them to call you.

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This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a financial adviser, whether the information is appropriate in light of your particular needs and circumstances.