BROKER CHECK BY FINRA

Kestra Client Log-In

Wealth Preservation Solutions

Helping Business Owners and Families Accumulate and Preserve Wealth

Menu 
  • home-icon-15
  • Services Overview
  • The Candid Snapshot
  • Upcoming Events
  • Articles & Videos
  • About Us
  • Contact Us
  • Wealth Transfer
    Planning
  • Investment
    Planning
  • Exit
    Planning
  • Business Succession
    Planning
  • Insurance
    Planning
  • 401(k)
    Planning
Home » Insuring Your Future Exit

Insuring Your Future Exit

~ Article by Kevin Ellman, CFP ®

Exit Planning Strategies Series - Illustration by Copyright Janet Atkinson

Illustration by Janet Atkinson

Business owners are risk-takers by nature. Interestingly, however, is the fact that these same owners are often-times not risk averse. What this means is that owners will assume risks in one area of their lives, but not necessarily work to mitigate risks in other areas. The primary issue in not mitigating risks lies in the fact that there are a lot of people in your world who rely on you and the decisions that you make. This newsletter challenges the use of insurance in the singular manner of addressing a loss of life. In fact, insurance products are useful tools throughout the spectrum of advanced planning for a future exit. This newsletter is written with the intention of discussing risk mitigation and broadening owner’s views on how and where insurance can ground and solidify your plans for a future exit, i.e. while you are still alive.

An Aleatory Business Contract
Let’s begin by taking a look at insurance by starting with the concept of an ‘aleatory contract’. Insurance policies are known as aleatory contracts. An aleatory contract is defined as “an agreement concerned with an uncertain event that provides for unequal transfer of value between the parties. Insurance policies are aleatory contracts because an insured can pay premiums for many years without sustaining a covered loss. Conversely, insureds sometimes pay relatively small premiums for a short period and then receive coverage for a substantial loss.”

So the financial industry provides a marketplace to understand your business risks and allow you an opportunity to share those risks with another institution. In a limited sense it is a forecast of the future – in the case of insuring the loss of life, if the event / death that you are insuring occurs, you “win” and the insurance company pays. If the event does not occur, you don’t necessarily lose because you have some peace of mind.

Insurance as an Asset Class
Insuring for the loss of life is only a small part of utilizing insurance in an exit plan. However many business owners fail to see the benefits of certain other forms of insurance. Insurance can serve as an asset class and a tool to harvest savings, share benefits and leave assets on your company balance sheet, as well as sharing an asset with key people to more easily retain them at your company. Most business owners, when thinking about planning for their exit, fail to see insurance as a tool for many facets of a transition plan.

Insurance as an Accumulation Asset for a Future Exit
Some typical goals of business owners who are thinking about a future exit, include:

  • Having enough retirement income to sustain your lifestyle.
  • Retaining key people and aligning incentives to grow the business
  • Having a tax efficient transfer of wealth as the business changes hands.
  • Avoiding complex tax code provisions inside of your key person incentive plan
  • Providing a path for key people to potentially purchase the business interests from you, the owner.
  • Having access to cash that is needed to run and grow the business.

Insurance contracts can serve as a ‘funding solution’ for the issues listed above. The primary goal of this newsletter is not to provide complex details of how this can work, but rather to help to re-conceptualize the role that insurance can play in your future plans.
Remember that insurance is a unique asset in many respects, not the least of which is the ability to harvest tax benefits, provide disciplined savings with your planning, and to customize an agreement that retains your key people.

Solving or Not Solving for Death
As mentioned, business owners too often view the purchase of insurance only as a vehicle to deliver needed cash in the event of a death. The use of funds is often to replace business income or to fund family needs and / or estate taxes. Many business owners hold contracts that are set to address these contingencies.
However, there is another way to look at insurance: as a tax-efficient, forced savings plan for you, your company, and your key people. In this case, the purpose of insurance is not necessarily to anticipate a death and for cash to be provided at the time of death. Rather, this form of insurance is for cash accumulation, either within the company or held outside of the business.

Overcoming Immortality

One of the reasons that insurance is looked down upon as an effective tool for exit planning is because many owners have survived against insurmountable odds to grow their business. Also, there is the uncomfortable issue of dealing with death. However, when insurance is viewed in more broad terms as a tool to accomplish many goals while you continue to grow your business and make plans for a future exit, the options and alternative uses begin to grow.

Concluding Thoughts
For better or for worse, it is often said that insurance is something that is sold, not purchased. In other words, the use of insurance in an exit plan has historically required a sales process in which a purchaser of insurance needs to see a vision of what could happen to their lives without insurance. This newsletter is written with the intention of moving business owners in a direction where a desire to learn about and utilize certain forms of insurance is something that is ‘purchased’ for the benefit of you and your company, and not something that needs to be ‘sold’.

Take Action Today
Call your insurance advisor and request a review of your existing policies for your business and your personal lines. Seek to learn about the different ways that insurance can serve as a catalyst and disciplined approach to advancing your plans for a future exit. You worked a lifetime to build what you have. Just as you were responsible for the success of your enterprise, you are equally responsible for seeing its succession and/or transfer, including your exit. Be sure to remember to insure your future exit. In doing so, you will advance further towards the peace of mind that comes as a result of proper planning.

We hope that this newsletter helps you to understand the complexities of an exit decision and transaction and inspires you to begin your planning today.

Read more more about our exit planning services.

To get started contact Rob Pavese, Director of Business Development
by phone (201) 632-2048 or email at rpavese@wpsllc.net.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Wealth Preservation Solutions is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS are not affiliated with any other entity listed herein.

This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and individual needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances.

Exit Planning content © copyright Pinnacle Solutions. All rights reserved. Beri™ and ODI™ are trademarks of Pinnacle Solutions.

Article written by Kevin Ellman, CFP ®

As a financial advisor for over 25 years, Kevin Ellman provides the full array of financial, estate, and retirement planning services to high net-worth business owners, families, executives, and individuals. He has appeared as a financial commentator on CNBC (Morning Call, Portfolio Make-Over, Make Your Money Work, Power Lunch), and on ABC, and has been quoted in Business Week, CBS Market Watch, Fortune Magazine and The Wall Street Journal. Learn more about Kevin Ellman...

Related Articles

Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonOwners Surveyed Cannot Afford to Exit and Do Not Want To Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonAdvisor Collaboration is Core to A Successful Exit  Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonSeeing the Big Picture with Your Exit Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonThe Myth of Easy Exits Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonExit Planning is a Complex Decision and a Complex Transaction How To Avoid The Fear, Hope and Greed Cycle of Buying StocksHow To Avoid The Fear, Hope and Greed Cycle of Buying Stocks Kevin Ellman Video Exchange Traded Funds – Part 1Exchange Traded Funds – Part 1 Kevin Ellman Video - Dividends Part 1Dividends Part 1
Questions? Contact us today

Learn about our
Complimentary Candid Snapshot

Are You Ready for a Business Transition?

What's Your BeriTM?

(Business Exit Readiness Index)

Whether you'd like to transition your company in ten years or ten days. Our Business Exit Readiness Index™ (BERI™) will help you get on the right path. Take our 10-minute readiness survey, and you will receive a complimentary six-page customized report based on your answers.

Start BERI™ Survey

What's Your Company's ODITM?

(Owner's Dependence Index)

The Owner Dependence Index™ (ODI™) Report is an important diagnostic tool to help owners see how dependent their company is on them. Get started today by taking our short assessment about your involvement with your business as a step towards measuring your business’s dependence on you and ultimately how to increase your business’s value.

Start ODI™ Survey
Download our Exit Planning Brochure

The Candid Snapshot

Is Your Wealth Management Plan Working For You?

Learn more about our
Complimentary Candid Snapshot
To get started with a complimentary 401(k) Plan review simply provide the following documents.

For401(k) Plans:

  • Current Plan Adoption Agreement
  • 408(b)(2) Notice (Participant Level Expenses – Fee Disclosure)
  • 404(a)(5) Notice (Plan Level Expenses – Administrative Portal / Record Keeper or TPA)
  • Summary of Plan Description
  • Investment Policy Statement (IPS – Current / Most Recent)
  • Latest/Last Plan Review (Date Provided / Delivered)

For Health and Welfare Benefit Plans:

  • Current Employee Census (Include Home Zip Codes)
  • Plan Benefit Summaries (ERISA Summary Plan Description / SPD)
  • Last Two Years Paid Claims by Month (Include Employee Counts by Month / 100+ Lives)
  • Last Two Years Renewal Package
  • Current Rates / Fees / Expenses
  • Large Claim Data (All Claims Over $25,000 / With Diagnosis if Available)
Paul Miller is President of Wealth Preservation Solutions, LLC and no longer with Sagemark Consulting.

The WPS Planning Process

 Wealth Preservation Solutions Planning Process

Wealth Preservation Solutions Planning Process

Related Articles and Videos

Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonOwners Surveyed Cannot Afford to Exit and Do Not Want To Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonAdvisor Collaboration is Core to A Successful Exit  Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonSeeing the Big Picture with Your Exit Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonThe Myth of Easy Exits Exit Planning Strategies Series - Illustration by Copyright Janet AtkinsonExit Planning is a Complex Decision and a Complex Transaction How To Avoid The Fear, Hope and Greed Cycle of Buying StocksHow To Avoid The Fear, Hope and Greed Cycle of Buying Stocks Kevin Ellman Video Exchange Traded Funds – Part 1Exchange Traded Funds – Part 1 Kevin Ellman Video - Dividends Part 1Dividends Part 1
Get Kevin Ellman’s new book, The 7 Biggest Money Mistakes People Make and How to Avoid Them, and learn how to preserve and grow your wealth! Seven Biggest Money Mistakes People Make and How to Avoid Them: Preserve and Grow Your Wealth by Kevin Ellman CFP

Kevin Ellman Video Series


Finding a Financial Advisor Part One

Finding a Financial Advisor Part Two

Dollar Cost Averaging

Dividends Part One

Dividends Part Two

ETFs Part One

ETFs Part Two

ETFs Part Three

Share this website with friends and colleagues

The Wealth Preservation Solutions Team

  • About Us Overview
  • Dennis J. Amico
  • Kevin Ellman CFP®
  • Paul D. Miller
  • Robert W. Davis CFP®, RICP®
  • Dolores White
  • Susan J. Forman CFP®
  • Carrie Ware
  • Michael Korb
  • Barry Solon
  • Chris B. Szem
  • Robert Pavese, JD

Articles & Videos On Investing

  • Finding A Financial Advisor – Part 1
  • Finding A Financial Advisor – Part 2
  • Exchange Traded Funds Part 1
  • Exchange Traded Funds Part 2
  • Exchange Traded Funds Part 3
  • Dollar Cost Averaging
  • Dividends Part 1
  • Dividends Part 2
  • Strategies to Help Maximize Your Money
  • Our Investment Planning Process
  • Estate Tax and Succession Planning After the Cliff
  • Estate and Business Succession Planning

Services Overview

  • Services Overview
  • Estate Planning and Asset Protection
  • Investment Planning
  • Exit Planning
  • Business Succession Planning
  • Insurance Planning
  • Benefit Planning

About Wealth Preservation Solutions

  • Home
  • Services Overview
  • The Candid Snapshot
  • Upcoming Events
  • Articles & Videos
  • About Us
  • Contact Us

Disclosure

BROKER CHECK BY FINRA

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Wealth Preservation Solutions is not affiliated with Kestra IS or Kestra AS.

This site is published for residents of the United States only. Registered Representatives of Kestra Investment Services, LLC and Investment Advisor Representatives of Kestra Advisory Services, LLC, may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact our Compliance department at 512-697-6000.

All content on this website, including but not limited to articles, images, text, photos, illustrations, and videos is copyrighted and may not be used, downloaded, reprinted, republished, in whole or part, without expressed written permission. For usage permissions, please contact us. We will respond promptly to your inquiry. Thank you.

BERI™ and ODI™ are trademarks of Pinnacle Equity Solutions, Inc. All Rights Reserved.

Copyright 2016 Wealth Preservation Solutions, LLC. All Rights Reserved. | Privacy Policy Website by Atkinson