How much coverage do I need?
The amount of death benefit to purchase will depend on your unique needs and goals for your family. As a starting place, consider:
- The amount of income your heirs stand to lose in the event of your premature death
- The estimated full market value of your business, and if a family member will take over, how much is needed to equalize your estate
- Particularly for service-oriented businesses, the value of your business may be significantly linked to your personal experience, specific skill set and goodwill. The shortfall between how much your heirs could potentially sell the business for after you are gone should be considered.
- Your desire to save for retirement in tax-advantaged ways. If this is the case, the policy can be designed with a focus on cash value accumulation. This type of design may be attractive to small business owners who either do not have access to traditional qualified plans or when the strict qualified plan contribution limitations prohibit the owner from adequately saving for retirement.
Putting it all together
The personal key-person solution can help address some of the financial-planning challenges you and your business may face. Focusing on what makes your business unique, the plan can be designed with your specific needs in mind and can offer protection in many ways. Please contact us if you are interested in creating such a plan.
In next blogpost, we will show you a case study how this solution worked for someone.