This type of insurance helps partners or shareholders of a business buy out the terminally ill persons share of the business. Even if you did have available funds to buy a partners share, it may be preferable to have a suitable insurance plan in place. We are well placed to advise partners and shareholders on arranging suitable protection.
How it works:
Each partner or shareholder takes out life cover, or a life and critical illness policy. The premiums can be paid by the individual or the business. Then each of the policies are put into a trust for the other partners. A contract called a ‘cross option agreement’ is then entered into by each partner which is a reciprocal agreement that guarantees:
- The remaining partners have the option to purchase the shares from the deceased partners estate.
- The deceased partners state retains the option to sell the shares to the remaining partners.