Advisor: “Mr. Client, do you have a buy/sell agreement?”

Client: “Yes.”

Advisor: “Excellent.”

Wrong!

What good is a buy/sell agreement if it isn’t funded? How do you know if it is funded if you don’t ask? How do you propose a company that is worth $5,000,000 with illiquid assets fund a 50% buyout of the company with a signed document?

Insurance is needed to fund the buy/sell agreement. Ask your clients that are business owners if they have a buy/sell agreement, but don’t forget to ask if it is funded.

Bonus: If they have an agreement and it is funded, they may think they are out of the weeds. They would be wrong. We recently came across a buy/sell agreement that wasn’t signed! Agreement in place, funded with life insurance–but they forgot to sign the agreement. All they had to do was sign it, right? If only it were that easy…

One of the owners… is now dead.