Let’s say that you are a partner in a small business and you are planning your estate. You have poured a lot of your financial resources into the business over the years and it represents your largest asset. How do you make this asset liquid after your death so that its worth can be spread to multiple different heirs?
While it would be possible for your family to sell the business after you pass away, this could leave your remaining partners in a difficult situation. They would want to have a say over who came into the fold, and of course you would feel the same way if one of your partners was to predecease you.
One way that all of the above can be addressed is through the creation of a buy-sell agreement. You could implement the cross purchase plan, and this involves each of the partners purchasing an insurance policy on the life of every other. The value of the combined policies will equal the value of a share in the business.
Upon the death of one of the co-owners of the business the insurance policy benefits will be paid out. The surviving partners then combine all of the proceeds and use them to purchase the share that was owned by the partner that passed away from his or her heirs.
This is one way to handle a particular type of small business succession situation. To gain a detailed understanding of succession planning for small business owners, simply take a moment to pick up the phone and arrange for a consultation with an experienced and savvy Westchester County estate planning lawyer.