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Buy & Sell Planning for Businesses

Buy-Sell Life Insurance

Planning for the loss of a business owner or partner is crucial to ensuring the continuity of your business and protecting the financial security of your family and the families of each partner or co-owner.

To protect your business, your loved ones and your co-owners or partners, you can implement what is known as a buy sell agreement, which specifies what will happen to the interests of a deceased owner, partner or shareholder. 

Buy sell agreement helps preserves control and value of a business at the death of one of the owners/partners.

These agreements provide that the estate of the deceased owner will be paid a fair value for his/her interest and that the surviving owners will maintain control and ownership of the business. Life Insurance on the owners can be a source of money to fund this agreements.

The structure of the buyout and  Life insurance funding should be tailored to the objectives of the business owners.

There are three main methods to fund these types of agreements:

Criss-Cross Method

Each shareholder purchases a life insurance policy on the life of the other shareholder(s) and names himself or herself as beneficiary. Subsequently, the shareholders and company complete a Buy/Sell Agreement that requires the surviving shareholder(s) to purchase the shares of the deceased shareholder, usually at fair market value.

Upon death of a shareholder, the surviving shareholder(s) uses the insurance proceeds paid from the deceased’s life insurance policy to purchase the shares from the deceased shareholder’s estate.

Promissory Note Method

With this method, the operating company purchases a life insurance policy on the life of each shareholder. The company is named as the beneficiary of the policies and a Buy/Sell Agreement is put in place requiring the surviving shareholder(s) to purchase the shares of the deceased shareholder at fair market value. Upon the death of one of the shareholders, the company receives the insurance benefit and pays the proceeds to the surviving shareholder(s) as a capital dividend, allowing them to honor the promissory note.

Corporate Redemption Method

The operating company purchases a life insurance policy on the life of each shareholder, and the company is named the beneficiary of each of the policies. This method requires the company to purchase and cancel (or redeem) the shares of the deceased shareholder.

No matter what kind of business you are involved in—a corporation, a partnership, an LLC, or even a proprietorship you should strongly consider a buy-sell agreement.

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Why you should keep your New Year's resolution to get life insurance

We’re well into 2019 and New Year’s resolutions are probably being broken.

If getting life insurance was one of them, you might want to consider sticking to it – the longer you put it off, the more it could cost you down the road.

“Even if the need isn’t immediate, buying life insurance now is a smart decision: the younger and healthier you are, the less expensive life insurance will be,” Michael Aziz of Canadian Protection Plan told Yahoo Finance Canada.

Unless you’re a young person living a high-risk lifestyle filled with extreme sports, the premiums you pay will go up as you get older and health problems start to develop.

“This, however, doesn’t mean someone who isn’t perfectly healthy can’t or shouldn’t buy life insurance,” says Aziz.

Aziz says many first-time buyers overestimate the cost of life insurance. There’s also the complexity and array of options for purchase. Many providers offer online tools to get a quote and even apply for life insurance, and sitting down with an insurance advisor can you help you navigate through the lingo and help you decide what you need.

“This would include current and future financial obligations, such as mortgage payments, car loans, credit card, and other debt, education, income replacement,” says Aziz.

“Even if you can’t immediately afford to protect against all of this, having some protection is better than having none at all.”

There are two options to consider: term life and permanent life insurance. Term life covers a limited term for a set monthly premium. Terms generally range between 10 and 30 years.

“Term plans are often purchased by people who may be younger, are looking for the least expensive life insurance option, or want to protect a debt that has a similar term, such as a mortgage,” says Aziz

Premiums for term life insurance are cheaper compared to whole life or permanent life insurance.

“Permanent life insurance, which is generally more expensive than term, is designed to provide protection for a lifetime as long as the premiums are paid, and often provides a safe and tax-advantaged investment component that could help in retirement,” says Aziz.

Life insurance isn’t just for people with spouses and children who’ll be left in the lurch if you die.

“For those who have minimal family or other commitments, life insurance can be a way of leaving a legacy to grandchildren or community, through a charity or cause.”

Jessy Bains

Yahoo Finance Canada



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People With Disabilities: Steps to Take Control of Your Finances

People With Disabilities: Steps to Take Control of Your Finances

Thinking about the financial impact of the potential need for care is not easy. It can feel like a heavy topic, filled with possibilities we do not want to consider. But, there is much that can be done in the now to give your future the support you deserve.

Save Through Further Assistance

To best prepare for your financial future, it’s a good idea to save what money you can. There are a variety of ways you can do so, and applying for additional assistance to cut back on everyday costs is one. For example, there are programs that provide energy assistance to those with a low-income. If you qualify, you’ll get a yearly payment to help cover the burden of your electric bill. You can also apply for income-based housing, if you do not already have it. This can help you save additional funds that you can later put toward medical care. Again, if you qualify, food stamps can be a great way to save a bit of money at the grocery store. If possible, you can work a bit from home to earn some extra income. You might sell crafts or art on Etsy, resell things on Ebay, or any number of other avenues. However, you need to be careful because you might lose your Social Security if you earn too much.

Long-Term Care Insurance

Unfortunately, much of Medicaid and many general health insurance policies will not cover long-term care. This includes assisted living, day care services, and importantly, in-home care. As we age, we may become less independent around the home, and we may need additional help with our daily routines. Long-term insurance will cover this care. Such care can maintain a person’s independence and dignity as we age. It is important to shop around, however, as prices and coverage can vary. Speak to an advisor to get good advice and guidance to see if this is something you may need.

Spouse’s Income

If you require care, Medicaid won’t pay your spouse to provide it. There is good news, however, as many states have programs that will allow you to elect your own caregiver, which may be your spouse. Yet, you need to ensure that you qualify financially to be eligible. Your spouse must make less than $25,000 a year and, jointly, you must have less than $4,000 in physical assets. Luckily, that does not include a home. Some programs are put in place by Medicaid itself and then handled through a separate agency, but some are state run entirely. Additionally, some states offer paid family leave, which allows for a spouse or other family member a period of time in which they can care for a loved one. Unfortunately, not every state has a program in place, so do research if yours does. If you are a veteran, you have additional support, including for your spouse.

The Benefits of a Reverse Mortgage

One way to pay for safe, sufficient care later in our senior years is to consider a reverse mortgage. This is not your typical mortgage, but is a home equity loan. You receive monthly payments, which you don’t have to pay back until you leave the home, either through sale or if you pass away. Thankfully, the loan will never exceed the value of the home, so you will never enter debt. Care, no matter if it is private, in-home or assisted living, can be quite expensive. A reverse mortgage may be just the way to pay for it, depending on who currently lives in the home, and how long they will be there. Assess all of the pros and cons for your particular situation and check different mortgage options to pick which is best for you.

Your needs are specific to you. Disability varies and there's no one template, but there are universal actions you can take to start planning for the possibility of care as you age. You deserve a secure future and today's financial decisions can be crucial to that.

Hazel Bridges

hazel.bridges@agingwellness.org

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Financial Peace Today

Protect Your Family Today.

Generational Wealth

Most people think of life insurance as a costly, but sometimes necessary, expenditure. It’s rarely considered an investment. It’s unfortunate, because life insurance has some important attributes that can make it an effective financial tool. For starters, investments inside a permanent life insurance policy can grow on a tax-sheltered basis.

If you choose to insure the life of a child or grandchild, the cost of the insurance will be low, and the savings accumulated over the years can be used to help pay for an education, among other things.

Consider these numbers: If you were to contribute $216 each month to a participating whole life insurance policy on the life of your child, starting from their first year of life, you will have accumulated $70,023 (the cash value of the policy) in 20 years (assuming a current dividend scale of 6.35 per cent annually). These funds could be used to help pay the cost of an education. Alternatively, the funds could continue to accumulate in the policy and would be worth $135,994 at the age of 30 (this could make a helpful down payment on a home), $249,979 at 40 (perhaps to help start a business), and $990,023 at 65 (perhaps to help your child meet costs of retirement).

Sure, you always need to compare an investment like this to the alternatives – most notably a registered education savings plan (RESP). If you were to invest the same $216 each month in an RESP for 20 years, collect the maximum Canada Education Savings Grants (CESGs) along the way (equal to 20 per cent of RESP contributions to a maximum of $7,200 for each student), and chose investments that are of the same risk level as the whole life insurance policy (fixed income risk), you’d end up with about $95,150 in the RESP after 20 years (assumes an average rate of return of 4 per cent).

So, why not choose the RESP instead? Make no mistake, an RESP is an effective way to save for a child’s education. But the savings must be used for a single purpose: the education of the student (otherwise, taxes, penalties, and/or repayment of the CESGs could result).

The nuances

There are other nuances that could make the insurance policy a great option:

•  The figures above assume that there are no more insurance premiums paid after 20 years.
•  The funds in the insurance policy can be accessed in a number of ways: Receive the annual dividends on the policy as cash payments, borrow from the cash value of the policy, withdraw the investments in the accumulating fund, cancel the policy and withdraw the cash value, or borrow up to 90 per cent of the cash value from a bank. Each method has its own tax implications.
•  You can transfer ownership of the insurance policy to your child or grandchild on a tax-free basis once they’ve reached the age of 18. This will result in a transfer of the assets inside the policy, tax-free, and free of the attribution rules that might have otherwise applied to income earned while the kids were minors.
•  If you have the means, you might consider buying an annuity today to provide the cash annually to pay the insurance premiums for this strategy. This is truly a “set it and forget it” idea. The cost of the annuity could be less than the cost of paying the premiums annually out of other cash flow.
• Child can attend any educational program, anywhere in the world and at anytime without concern to any government rules on RESPs.
• Child can use cash value in policy  as a down payment for home purchase, purchase of first vehicle or plan wedding.
• Child does not need to purchase Life Insurance ever again.
• Huge cash value is readily available to supplement child's retirement benefits.
• An enormous Life Insurance amount plus remaining cash value passes on to heirs tax free on the death of child, thus creating generational wealth.
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WHY TRAVEL INSURANCE?

Why Travel Insurance?

Travel insurance is always important, to ensure you, your family or visitors to Canada would be protected for emergency medical expenses and many other unforeseen costs during a trip. Without it, travellers can be left to deal with large out-of-pocket expenses.
Single-Trip Emergency Medical: Up to $5 million in emergency medical coverage for one particular trip.
Single-Trip All-Inclusive: Includes emergency medical, trip cancellation & trip interruption, baggage loss, damage and delay, and flight and travel accident.

Single-Trip Travel Canada Emergency Medical: Provides the emergency medical plan at 50% off the premium when all travel is within Canada.
Multi-Trip Emergency Medical: Eliminates the need to apply for coverage every time you travel. Take an unlimited number of trips within one year, of the duration of your choice, with up to $5 million of emergency medical coverage. Trip duration options include 10, 18, and 30 days.
Multi-Trip All-Inclusive: Includes emergency medical, trip cancellation, trip interruption, baggage loss, damage and delay and flight and travel accident - for an unlimited number of trips within one year, of the duration of your choice. Choose from durations of 10, 18 or 30 days.
Trip Cancellation & Trip Interruption: Protects the investment you made in your trip against unforeseen events that may happen prior to, or during, the trip. Included in all inclusive plans or it can be purchased as a stand-alone plan.
Emergency Medical Top-Up: Additional coverage for those times when coverage under a multi-trip plan doesn’t last long enough to cover your entire trip.

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Best Health & Dental Plan

Lock in 2017 rates! Apply by September 30, 2018.

Manulife Health & Dental coverage represents some of the best insurance values available in Canada! Plus, apply by September 30, 2018 to lock in 2017 rates for a full year.

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6 Reasons Why You Should Invest in Life Insurance

For many people, their first experience with life insurance is when a friend or acquaintance gets an insurance license. In my case, a college friend, recently hired by a major insurance company, contacted me (along with all of his other friends) to buy a $10,000 policy underwritten by his company.
Unfortunately, however, this is how most people acquire life insurance – they don’t buy it, it is sold to them. But is life insurance something that you truly need, or is it merely an inconvenience shoved under your nose by a salesperson? While it may seem like the latter is true, there are actually many reasons why you should purchase life insurance.

 Reasons to Buy Life Insurance

As I grew older, got married, started a family, and began a business, I realized that life insurance was indispensable and fundamental to a sound financial plan. Over the years, life insurance has given me peace of mind knowing that money would be available to protect my family and estate in a number of ways, including:
1. To Pay Final Expenses
The cost of a funeral and burial can easily run into the tens of thousands of dollars, and I don’t want my wife, parents, or children to suffer financially in addition to emotionally at my death.
2. To Cover Children’s Expenses
Like most fathers, I want to be sure my kids are well taken care of and can afford a quality college education. For this reason, additional coverage is absolutely essential while my kids are still at home.
3. To Replace the Spouse’s IncomeIf my wife had passed away while the kids were young, I would’ve needed to replace her income, which was essential to our lifestyle. I also would’ve needed to hire help for domestic tasks we’d shared like cleaning the house, laundry, cooking, helping with schoolwork, and carting kids to doctor’s visits.
4. To Pay Off Debts
In addition to providing income to cover everyday living expenses, my family would need insurance to cover debts like the mortgage so they wouldn’t have to sell the house to stay solvent.
5. To Buy a Business Partner’s Shares
Since I’m involved in a business partnership, I need insurance on my partner’s life. The reason is so if he dies, I will have enough cash to buy his interest from his heirs and pay his share of the company’s obligations without having to sell the company itself. He has the same needs (due to the risk that I might die), and he simultaneously purchased insurance on my life.
6. To Pay Off Estate Taxes
Estate taxes can be steep, so having insurance in place to pay them is essential to avoid jeopardizing assets or funds built for retirement. Use of insurance for this purpose is most common in large estates, and uses permanent (rather than term) insurance to ensure that coverage remains until the end of life.

Final Word

Some people mistakenly believe that life insurance is a scam. This is due to the fact that the money for premiums is lost if death doesn’t occur during the coverage period (in the case of term insurance), or because many people live to a ripe old age and continue to pay their permanent insurance premiums. Such naysayers compare life insurance protection to gambling, and forgo the protection entirely.
Of course, there is no bet – you will die, but no one knows when. It could be today, tomorrow, or 50 years into the future, but it will happen eventually. Life insurance protects your heirs from the unknowable and helps them through an otherwise difficult time of loss.
Do you have life insurance? Why or why not?

Contact a Licensed Advisor today to discuss your Life Insurance Needs.

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Micheal Lewis
MoneyCrashers

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All About Mother's Day

Your wonderful, sweet mother is worth…no less than $68,875 per year, according to Insure.com’s annual survey quantifying the value of all of those labors of love she performs day in and day out.

If you’re as insulted as I am, then let’s calm down together a bit. Though I believe a mother’s value is beyond calculation, it’s clear that the insurance information and tools site each year computes a Mother’s Day Index for two reasons:

One is to acknowledge that whatever kind of paid work they may do, mothers get no day off from cooking, driving, helping with homework, taking care of the kids and sundry other activities that Insure.com includes in its Index, which rose 1.9% over last year’s value, meaning she would actually be shortchanged for these efforts, if paid, given today’s 2.1% inflation rate.

Its second reason, doubtless, is to sell insurance. While that is self-interested, I find it more praiseworthy than the first. It is an important protection for the whole family! If Mom’s income would be reduced following Dad’s untimely demise, life insurance is a moral and financial imperative. Similarly, in the event of an unexpected death, a life insurance policy would pay for services that must carry on and which grandparents may be unwilling or incapable of performing on a daily basis.

This matter is no exaggeration. Many Moms do go uninsured. I quote from Insure.com’s release:

…36 percent of women in an annual poll by Insure.com reported that they cannot afford a life insurance policy. But with the value of moms reaching nearly $69,000 a year, most families cannot afford to be without one.”

The news release continues:

Of the women who reported having either a term, whole or both types of life insurance policies, nearly a quarter reported paying $251-$500 annually for their policy – that’s less than $1.50 a day.”

It bears mentioning that the cost of term life insurance for a young person can be had quite cheaply – at less, even much less, than a dollar a day.

But beyond insurance, important though it be, I think there are a few financially connected sort of lessons we can learn, even if your Mom, like mine, is not a money person.

The most basic is that whatever your issue is – not saving enough, can’t control spending – you can actually achieve your goal if stop, consider and emulate the countless and indefatigable sacrifices your mother has made for you.

The second is an awareness of longevity. In the normal course of life, a mother predeceases her children. Factual as this is, it is nearly impossible to wrap your head around it, meaning if the opportunity still exists, you can still ask more questions, learn more, listen more and express your gratitude.

The third goes beyond investing and is reflected in how a mother views her “portfolio.” If you have three investments, and two have displayed handsome returns and one has not, you can say – “that’s great, I’m up.” A mother finds no solace in two kids doing great and one experiencing difficulty. Her heart beats for her children, no matter what, no matter when. And it is this fact that gives lie to the very concept of Mother’s Day, which is actually every day.

Culled from seekingalpha.com