Life Insurance Funded Buy-Sell

If you’re in a partnership and your partner passes what happens by default is that their shares pass to their spouse. You’re now in business with their spouse. Your focus continues to be the long term growth of your company. Your deceased partner’s spouse is either focused on short term cash, even at the expense of liquidating assets or perhaps worse, decides they’d like to start helping out around the business. Either way, you’re now in a partnership that’s conflicted for both of you.

How it Works

The solution is straightforward and consists of two components.

Buy-Sell Agreement

The first component is a buy sell agreement drafted by your corporate lawyer. The agreement confirms that upon either of your premature deaths, that your spouses have agreed to immediately sell their inherited shares back to the company. The company further agrees to buy those shares.


The second component is funding. Finding free cash to purchase a substantial share of the company may not be possible and best case would require substantial loans and liquidation of assets. So instead, both partners purchase a life insurance policy on each other to fund the share purchase.

With these two components in place the result is exactly what both partners want. The deceased partner’s shares go to their spouse and the life insurance proceeds go into the company. The spouse immediately sells the shares to the company, and the company uses the life insurance proceeds to pay for them. You now have complete ownership of the company without any new severe financial stress from the share purchase, and your partner’s spouse has the cash from their shares which is what they want.

There are some complexities around policy ownership, premium payments, and policy size that need to be individualized. That’s where our personal consultation with our advanced business planners can help. We’ll evaluate your specific situation, provide recommendations for you to run past your lawyer and accountant,and assist with the policy application.

Our advanced insurance specialists can provide you full details of how this can apply in your specific circumstances. Our first consultation starts with a detailed explanation of the strategy and information gathering. We’ll schedule a second consultation to provide and explain proposals. Lastly, we’ll step you through the application process. Start with an initial consultation.

Book A Consulation