Saturday, January 12, 2013

Why using Life Insurance Policy to Fund A "Business Buy-Sell Agreement"

If you are in business with other than immediate family member, chance will be one day, one of the business partner will pass-away or fall sick etc.

How do you buy or sell your "non-listed" share?

Even the surviving partners want to buy or even contracted to buy, how to ensure it is paid for?

The answer to a Business Buy-Sell Agreement is
1) Set up a Business Value Protection Trust (BVPT).
2) Properly plan and fund it with Life Insurance Policy.


  • Cheapest way to fund a purchase.
  • Only requires premium payment for the sum assured to be paid to fund a large purchase amount.
  • Business owners need not pay all the cash from their own's savings.
In a BVPT, the documents will be involved, to ensure a complete and executable plan are
1. Buy-Sell Agreement (sets the pricing and terms and conditions)
2. Life Insurance Policy OR Cash (to fund the purchase)
3. Power of Attorney (to allow the Trustee to transfer the share)
4. Trust Deed (to tell the Trustee how to distribute the proceeds)

How does it works?
  1. Determine the Value of Business
  2. Determine the Pricing and Way to Fund the Purchase
  3. Enter into Buy-Sell Agreement
  4. Execute the Power of Attorney
  5. Execute the Trust Deed