BY JOHN ELLIS, FINANCIAL ADVISOR
LAST week we discussed personal protection and the need to protect ourselves and our loved ones against the financial problems that follow serious illness and death.
This week we look at the situation as a business owner as there are additional concerns should we fall victim to serious illness or the future running of the business in the case of our death.
In the event of the death of a business owner who would take over their share of the business? And where would the remaining shareholders get the funds needed to buy the shares back from their family and even more importantly has this plan even been formalised?
What would happen to your business if a co-owner died prematurely? Would the remaining co-owners continue to maintain control of the business? Will they have the funds to buy back the share of the business from the deceased member’s family and has this plan been formalised?
Many business owners believe that it simply won’t happen to them. The chances of a partner or director, in a small business dying or becoming seriously ill before retirement are a lot higher that you might think.
Many problems can arise for a business when a partner or key employee dies
prematurely or becomes seriously ill.
The lack of credit to small businesses could result in some surviving business owners having insufficient funds to purchase a deceased owner’s share of the business or in some incidences getting into financial difficulty because of a key employee’s death.
What if you have an investment property within the business? Ask yourself these questions.
Does the property form part of your financial plans? Could the property be a burden to your family instead of the safety net it was meant to be? And if you died, would you leave it mortgage free?
There are specific business protection plans available in the market They are for individuals who want to ensure that their business or investment property will provide their family with financial security in the event of death or serious illness rather that a burden.
These plans are flexible and excellent value for money and can be used to provide funds needed to buy out a deceased partner’s share of the business or clear outstanding mortgages or debts.
They provide for a deceased business owner’s family in the event of premature death, ensuring a surviving business partner retains ownership and control of the business and avoid the need for personal loans to be taken out
In the case of an investment property, contracts are available that can be used to pay off some or all the outstanding mortgage on the investment property thereby reducing the burden of monthly payments for dependants and providing an asset for dependants
You can’t predict the future but you can plan for it. While we all hope and often believe it won’t happen to us, the reality is that people throughout Ireland are affected by unexpected illness and premature death every day.
Each year, Financial Advisors sees the serious life changing and personal challenges that their customers must face, along with the real value of having a relevant protection plan in place.
So its again imperative to talk to a professional financial adviser who can help you make the right decisions about the ways you could help protect your business and family.