Whole Life as a Business Asset

{3:42 minutes to read}  Today, I want to talk about a concept for business owners that we call whole life as a business asset.

Many times, people who own businesses keep money in cash for a plethora of reasons. A business owner needs money readily available all the time. Business owners also have certain financial obligations and need to plan accordingly.

Unlike an individual who has one economy to protect and plan for, a person who owns a business not only has to protect and plan for the economy of his family, but also has to plan and protect for the economy of that business.

The whole life as a business asset concept is for the business owner who might hold X amount of dollars in cash, to gradually move some of that cash into a cash value type of life insurance — whole life insurance.

If you have ever thrown a pebble into a pond, you know that it creates a lot of ripples, so let me give you the ripple effect of what happens here.

By moving the money from the cash account into the cash value whole life insurance, a bunch of good things immediately happen to protect that business owner:

• The business owner might have an obligation to buy out a partner in the event of a death; the death benefit could be used for that.
• The movement from cash into cash value might actually create a better long-term rate of return. The historical performance of life insurance certainly can be a competitive fixed income type of asset when compared with current rates of 1%, 1.5%, or 2% that people can get at a bank today.
• The business owner now has life insurance that could be used not only for a buy/sell agreement, but potentially for indemnifying the surviving partner by utilizing that death benefit for key person coverage.
• If the insured lives to retirement, that same policy will have cash value that could help provide income via a retirement plan — possibly a non-qualified deferred compensation plan or supplemental executive retirement plan, which would allow for the payments of income to an individual. The corporation would be able to cost recover that through the death benefit.
• The death benefit could also potentially be utilized for paying off any business loans that might need to be secured by life insurance.

By securing the life insurance in a corporate-owned policy, moving the money from cash to cash value life insurance, the business owner picks up all of these benefits without divesting of any cash:

• Buy-Sell insurance
• Key-Man insurance
• Business life insurance
• Deferred compensation

That business owner will be able to utilize the cash value in the policy just like he could utilize the cash in the bank account.

This very simple concept can make a world of difference to many business owners. If you have any questions, please send us an email or give us a call.

Registered Representative offering Securities through American Portfolios Financial Services, Inc. (APFS) Member FINRA/SIPC. Investment Advisory Services are offered through G&G Planning Concepts, Inc. which is not affiliated with APFS.  Strategic Wealth Advisors Network and Gassman Financial Group are not affiliated with APFS.

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