One of the reasons why it is wise to connect with an estate planning attorney is because solutions exist to address situations. A lot of people think that they have to somehow twist their objectives around some limited device like a simple will, but this is not the case.
With this in mind, let’s take a look at estate and succession planning for small business partners.
The best way to explain this approach is to use a hypothetical scenario. As we go through it, we will use a two-person partnership as the example, but it could extend to more than two co-owners.
Let’s say that you notice a historic restaurant space in the downtown section of your town that is up for sale. You have always dreamed of being in this business, and you know someone that has a background in the industry.
The two of you have a conversation, and you decide to buy the building and open your own establishment. It was a great idea, and the restaurant is successful from the start.
You both realize that you should put succession/estate plans in place. At that point, you could choose to enter into a buy-sell agreement that is called the cross purchase plan.
To implement this strategy, you and your partner would determine the value of each business share. You would then purchase life insurance policies on one another that would pay out an amount that is equal to the value of a share.
When one partner dies, the surviving partner would collect the insurance company payout. It would be used to buy the share that was owned by the deceased partner from their estate. This would be done in accordance with the terms of the agreement that was executed.
The same arrangement could apply to retirement, divorce, or long-term disability, but the purchase doesn’t necessarily have to be made with life insurance proceeds.
There is another type of buy-sell agreement called the entity purchase plan. Everything would be the same, but the business itself would purchase the share that was owned by a departing partner.
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Due to the great work that we have all done as citizens with regard to doing the right things, the pandemic in our area has been pretty well contained. As a result, we now feel comfortable resuming our in-person seminar series, and we are taking all the right precautions.
You can obtain a great deal of useful information if you attend one of these sessions, and they are being offered free of charge. To see the dates and obtain registration information, visit our seminar schedule page.
Schedule a Consultation Today!
It is great to build on your estate planning knowledge in any way that you can, but at some point, you will reach the conclusion that it is time to take action.
We know that it can be disconcerting to discuss personal matters with someone that you have just met. This is one major reason why a lot of people that know they should put a plan in place tend to procrastinate.
Our attorneys got into this particular area of the law because we sincerely care about the well-being of our neighbors and their families. You will find that we have the ability to put people at ease from the start, and we will always be available in the future if you need to update your plan.
If you are ready to schedule a consultation appointment, we can be reached by phone at 860-548-1000. There is also a contact form on this website you can use to send us a message. If you reach out electronically, you can expect to receive a prompt response.