Robbing Peter to Pay Paul

October 9, 2012


In this day and age, household expenses have increased because of the necessities which we now have to stay current with our friends and families. Technology has changed the way that we communicate with the world. Besides groceries, clothing, and mortgages or rents, we now pay for mobile phones, computers, iPads, digital television, and WiFi. Unfortunately, if we do not have these items, we lose track of what is going on in the world.

Because our household expenses have increased, we now have to be wise about how we are spending the rest of our money. Deciding what is important and what is not has become a challenge. For example, protecting the family against calamity in the event of loss is something we must do in order to have peace of mind. When young families start accumulating property and saving for college funds for the children, they must give careful consideration to protecting their investments. Most families will find ways of cutting expenses by reducing their costs of other items.

Therefore, a wise decision would be to purchase a life insurance policy to cover the mortgage and incomes that would be lost if something were to happen to the parents. In this way, the family can continue their normal lifestyle. They could remain in the house, continue paying the mortgage and the children could attend college without having to take out loans. The average cost of tuition alone is $6500 per year. This does not include room and board

One of the features built into life insurance plans to make payment of premiums easier is the grace period. When policy owners find themselves strapped for cash to pay the premiums, the grace period would extend the time in which to make the payments and still hold onto the policy. The policyholder would have thirty days to make the payments. This prevents the policy from lapsing and gives the policyholder time to make the payments. None of the benefits are lost because of late payments. The policy stays in force, giving the policyholder peace of mind.

In conclusion, parents must decide how they are spending their money on the necessities of life while still making wise decisions to protect the family against loss.

Continuing a Business Partnership with Life Insurance

October 2, 2012


When people decide to start a business, one can set up a sole proprietorship, one can start a partnership, or one can start a corporation. While the sole proprietor can pass the business along to the family, the partners in a business must decide in advance how each one’s interest in the business will be resolved upon one’s death, disability, retirement, or when one is forced to leave the business.

Each of the partners comes into the business with a set of skills or core competencies which enables the business to thrive. When one of the partners leaves the business, the other has to decide how to continue the business in light of the expertise which is no longer available. They would want to seek another partner with the same qualifications as the one leaving the business.

It takes time to locate a suitable partner and the surviving partner would need money to continue the business so that they would maintain the same profitability as before. Therefore, an agreement must be made as to how to continue the business in view of the loss which the surviving partner would suffer. A buy sell agreement is the way in which the partners could reach a consensus about the management of the business after one of the partners leaves. The buy sell agreement would be funded with life insurance on each of the partners.

The buy sell agreement would outline who could buy the deceased or disabled partner’s share of the business, the value of that share of the business, and the description of the circumstances under which the buy sell agreement would would be exercised. Those reasons could be death, disability, retirement, or a decision of one of the partner to leave the business. This would enable the continuation of the business without economic loss.

Once the partners agree on the circumstances, they would have an attorney prepare the agreement and then purchase life insurance to cover each of the partners lives. When one leaves the business, becomes disabled or expires, the other partner would collect the insurance money. The agreement could be a cross purchase plan in which each buys out the other’s interest in the business, or it could be an entity or stock redemption plan in which the partner’s shares in the business are redeemed. They the other partner would not have to purchase life insurance.

In conclusion, partners can agree on the disposition of the other’s share in the business upon death, disability, retirement, or withdrawal from the business. This would enable the business to continue running smoothly.