Securing corporate ownership

Mark and Luc are co-owners of a successful business. From the start of their partnership, they made it a priority to plan ahead for any potential unknowns that may arise in their business and with their families. It was imperative for them to ensure the ownership of the business remained with the original partners should something happen to one of them.

Both Marc and Luc also knew that their spouses had no interest in joining the company – today or in the future. Should one of them die, the responsibilities their spouses would incur upon inheriting their portion of the business would create an unnecessary burden for both the surviving spouse and remaining business partner.

Together they entered into a buy-sell agreement to protect themselves and their stake in the business should the unexpected occur. The agreement stipulates that if either Marc or Luc were to suddenly pass away, the shares of one would automatically be sold to the other.

Following the recommendation of their advisor, they met with an Estate Planning Specialist, to discuss their financial needs. The specialist recommended an insurance solution that would help finance the buy-sell agreement. This would provide immediate liquidity to buy out the shares of the deceased, and offer protection for both of their families.

When funding their buy-sell agreement with life insurance, Marc and Luc were able to predetermine that:

• The funds to purchase the deceased partner’s shares would come from the proceeds of a life insurance contract purchased by the corporation insuring both of their lives and naming the company as the policy’s beneficiary.
• In this example, should either Marc or Luc die, the life insurance proceeds would provide the remaining owner with sufficient funds to purchase the deceased’s shares and would realize their desire to keep the business running in the hands of one of the original owners.

Speak to your RBC Dominion Securities Advisor about meeting with an Estate Planning Specialist or Financial security advisor and discover how insurance solutions may help to finance a buy-sell agreement.