The Business Advisory Blog

The Business Advisory Blog

Insight, news and updates from Alliott NZ Chartered Accountants, Auckland New Zealand. The views expressed here are the views of the author and should be discussed in further detail should an article be relevant to your individual circumstances.

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

Vanessa Williams
Published on

Often when one of your children are involved in your family business or farm this creates disparity for your other children in the event of your death.

gen x-206A simple solution can be using Life insurance to enable your child involved in the business to buy your share of the business from the estate.  This then means that the total estate can be divided fairly amongst all of your children.

Similarly if you had one other child who was not involved in the business, a policy could be owned by that child to the value of equity your other child has in the business.

The one problem often encountered with using life insurance policies as a  solution is that the cost of the policy increases each year as one becomes older. The remedy for this which is available now from most insurance companies is a fixed/level premium which does not increase in price as you become older. The premium can be guaranteed right through to the age of 100 to create certainty in the future.

This type of insurance solution also works very well where there is business partnership or more than one shareholder.  It means a shareholder buy sell agreement is made between the shareholders so that if one of the shareholders dies or has a major health problem there is certainty around the sale of their share in the business.

It means that if one partner/shareholder dies or becomes disabled the following occurs:

  • The deceased estate agrees to sell the share in the business.
  • The partner/shareholder still actively involved in the business agrees to buy the other person's share.
  • A price for that share has already been agreed upon.
  • Funding for the purchase is created by way of the life insurance policy on the deceased/disabled partner/shareholder owned by the surviving partner/shareholder.
For more information regarding insurance-based solutions, please call Brett Pearce at Pearce Financial Services Ltd on 09 529 1912 or 021 954 170 or email bpearce@bpfs.co.nz.

Topics: Family business Insurance payments Partnership succession