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Disability Buy-Sell

This is a product designed to fund a Buy-Sell agreement in the event of a disability. In a partnership situation, if one of the partners becomes injured or is suffering from an illness that prevents them from working, what do the partners do? After all, they are still in business with someone that legally has to continue to share in the profits. What if the disabled partner’s wife or husband, that knows nothing about the business, wants to step in? What if the other partners have enough cash, or someone else wants to buy in, yet the disabled partner does not want to sell? Or even worse, what if the most common scenario occurs, where the other partners do not have the funds to buy out the disabled partner, even if he or she wants to sell? They may even have to close the business.

To prevent all of this, the partners can have their attorney draft a buy sell agreement that has a funded provision for disability before this occurs. That funding can come from a Disability Buy Sell policy. It can be structured with a long enough waiting period to see if the disabled partner recovers and wishes to return. Many partnerships have a Buy Sell agreement funded with life insurance in case a partner dies, but may not take into account the fact that disability is a more likely possibility. See the Financial Underwriting & Taxation file and the Sales & Marketing Ideas file in Broker Resources.

 


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