FOUR WAYS TO FUND A DISABILITY BUY-SELL PLAN

BY Chuck Lape

  1. Cash Method
    The business or its owners could accumulate sufficient cash to buy the business interest at an owner’s disability. Unfortunately, it could take many years to save the necessary funds, while the full amount may be needed in just a few months or years.
  2. Installments from Current Earnings Method
    The purchase price could be paid in installments after the owner’s death. For the purchaser(s), this could mean a drain on business income for years. In addition, payments to the surviving family would be dependent on future business performance after the owner’s death.
  3. Loan Method
    Assuming that the business could obtain a business loan after an owner’s disability, borrowing the purchase price requires that future business income be used to repay the loan PLUS interest.
  4. Insured Method
    Only disability buy-out insurance can guarantee that the cash needed to complete the sale, through either a single sum or installment purchase, will be available exactly when needed, assuming that the business has been accurately valued.

For many businesses, the best solution to the problems arising at the permanent disability of an owner is to use the proceeds from disability buy-out insurance to help purchase the disabled owner’s share of the business for its fair market value.

Check out this weeks new episode of Real Wealth Weekly: http://realwealthmedia.com/chucklape

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