When it comes to getting life insurance for business owners, there are a lot of reasons why you should get a policy. In part 5 of our blog series, Top 6 Reasons Why Smart Business Owners Use Life Insurance, we discuss how having policies in place can prevent family feuds.
#5. Prevent a Family Feud
A senior generation business owner can use life insurance and common estate planning agreements to transfer assets to heirs with “equitable” treatment, depending on their involvement with the company .
Leaving the ownership and control of the business to the children who are active and the life insurance proceeds to the children who are inactive can serve to equalize the inheritances among them and create a family “bank.” This can prevent arguments about money when the senior generation is no longer there to serve as the peacemaker and allow the family business to smoothly continue operations.
In addition, it avoids the need for the active children to purchase the business interests of the inactive children, perhaps at a time when the business may be unable to afford it. Depending on the particular facts and circumstances, the insurance may be owned by an ILIT for the benefit of the inactive children, and the insured may be the business owner or the business owner and his or her spouse.
Having your affairs sorted through life insurance policies can help avoid the family chaos and allow things to go a lot smoother for your loved ones. Our next blog will discuss the six and final benefit in our blog series and highlights saying "goodbye" to Uncle Sam.