Businesses

Succession planning involves several significant issues for business owners. There is no one-size-fits-all approach to keeping the business in the family. The tools and techniques best suited to a particular business are fact-specific. Life insurance and disability insurance can play an important role in helping a business survive and thrive as it moves from one generation of owners to the next.

Our team identifies the business owner’s objectives and develops a comprehensive business plan during the owner’s lifetime and following the owner’s death. We work to identify each specific goal, and then address the goal in a manner that satisfies the owner. We can advise on the effective use of life insurance to provide liquidity to family members and partners following a shareholder’s death. We provide financial equalization tactics for family members who do not wish to participate in a family business. Our team works closely with tax attorneys and accountants to help reduce estate, gift, and income tax concerns as well as provide funding strategies for excess tax liabilities.

Executives and other valuable personnel are a fundamental part of the successful day-to-day operation of any business. The death or disability of a key person could potentially disrupt revenue flow and lead to financial turmoil, internal stress and client attrition. The proceeds from a key person insurance policy can provide funds to recruit, hire, and train a replacement, restore lost profits, and reassure clients that business operations will continue.

It is important to the success of a closely-held company to have a well-thought-out compensation plan for key non-owner executives and managers. Just because the owners of a closely-held company may not be able to reward their non-owner executives with stock doesn’t mean that they can’t have an executive compensation plan that is meaningful and rewarding.

For example, a non-qualified deferred compensation (NQDC) plan can be used by a closely- held business to provide members of the senior generation with death, disability, and retirement benefits. An NQDC plan may be particularly useful in situations where the members of the first generation have transitioned the business to members of the next generation and are no longer receiving compensation. An NQDC plan also can ensure that key employees remain with the business during the transition period—a so-called “golden handcuff.” Because life insurance offers tax-deferred cash value growth and tax-free death benefits, it is the most popular vehicle for “informally” funding assets to offset the NQDC plan liabilities.

One of the key components to a successful NQDC is administration. GWE has access to some of the premier record keepers in the field, helping our clients achieve their goals.