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.
To view the full NFS December Business Briefs Newsletter, click here