business owner relieved to have life insurance

A widower’s story: Benefits of insurance planning

Considerations when one partner is a business owner

François was devastated when his wife Barbara passed away after a long battle with cancer. Barbara had been prudent in executing a will prior to her death that left all of her estate to François, including the shares of her interior design business. Barbara had worked hard with her business partner, Susan, for 15 years to build up their business and they developed a strong reputation in the industry. The business was a going concern with an estimated fair market value of $1 million.

François had no business acumen or talent for the design business and, although he had a cordial relationship with his wife’s business partner, he worried how he and Susan would deal with the private corporate shares he inherited.

Luckily, Barbara and Susan had signed a shareholder agreement many years ago with a buy-sell provision that instructed the surviving shareholder on how to deal with the death of one of the partners. Through the corporation, each of them had also purchased life insurance when the shareholder agreement was signed.

François was relieved to learn that the corporation would receive a tax-free death benefit of $500,000 on Barbara’s death which Susan was able to use to fund the buyout of Barbara’s shares from the estate. Susan, now the sole shareholder of the corporation, was able to carry on business without interruption and François, as the beneficiary of Barbara’s estate, received fair value of the business.

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