When business liquidation is the only course of action at an owner’s death,life insurance can provide the funds that make the difference between a planned liquidation and a financially-disastrous forced liquidation.
Consider the uses to which life insurance can be put in the planned liquidation of a business:
|Estate Settlement||Life insurance proceeds can be used to pay estate taxes and other estate settlement costs, allowing the liquidation to proceed on an orderly basis.|
|Family Income||Using life insurance proceeds to provide the surviving family with a continuing income can avoid a forced liquidation of business assets for this purpose.|
|Working Capital||If the executor needs additional cash to temporarily operate the business, life insurance can serve as the source of that cash.|
|Offset Shrinkage||Even a planned liquidation will usually result in some shrinkage in value, as compared to what the business was worth as a going concern. Life insurance can be used to replace the value lost in the liquidation.|
For “pennies on the dollar,” life insurance provides the cash needed to avoid a forced liquidation will be available exactly when needed — at the business owner’s death.
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