Ron Cohen, RHU

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March 10, 2010

Buy-Sell Disability

“One of the worst experience I can remember witnessing, was a family squabbling over each of their interest in a business.”
Ron Cohen, RHU

Disability Buy-Out is simply that. When a person is disabled, their share of the business needs to be purchased and that individual is then, “bought out” of the business. This may be in the form of “stock redemption” , "Cross Purchase", or however your legal adviser or attorney prepares the documents. It also depends upon the structure of the business.

Some businesses are set up as partnerships and have many partners. Typically, the business will have a “value” and this value is pre-determined and agreed to by all those (partners) or owners involved. Indeed, the business can grow and then be re-valued at a later point, as it should be. Thus preventing any future squabbles down the road.

It is very common to find partners and or business owners realizing the need to purchase life insurance to cover the “value” of the business and use these policies to “fund” the life insurance buy-out agreement in the event of “death”. Many, however, forget the need for a Disability Buy-Out policy and find themselves dealing with irate spouses, children and relatives down the road. I have watched it happen.

A disability buy-out policy removes many of these unforeseen problems and creates an immediate “agreed upon” solution for all those involved.

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