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If you are a professional, a dentist or doctor and you have your own business you might want to enter into a buy sell agreement with a friendly competitor. In this case you want to have a professional appraisal of you your business value. A buy sell agreement is one option you can have for your family in case you die unexpectedly.
If you have a dental practice and you die unexpectedly your practice will go down in value very quickly because your patients will find another dentist right away. However, if you have a buy sell agreement with another dentist your family will not have to go through having to deal with the loss of value of the business they have inherited from you.
You will have an agreement that you will take out a life insurance policy on the life of your friendly competitor and he will take an insurance policy out on you. If either of you die the other will be the beneficiary and will be able to use the insurance money to buy the business, or in this case, the dental practice from the family of the deceased dentist.
You do need to have a life insurance living trust in place and all of this needs to be prepared by an experienced estate planning lawyer who has done buy sell agreements before. Also, you need to have a trusted life insurance agent to give you the best policy for your situation. The benefit is to your family because your friendly competitor has agreed to pay your family the value of your business as it is now not after you die when the value starts to fall.
Of course you agree to buy his practice from his family with your insurance proceeds if he dies. You both will want to have accurate business valuations done on both your businesses to determine the amount of life insurance you need to take out on the other.
A buy sell agreement also works with partners in one business. If you and your partner own your business and one of you die, then the deceased family becomes the partner of the other. However, let us say that the spouse of the deceased partner does not get along with the surviving owner.
Unless the surviving owner can buy out the deceased spouse then he is looking at a tough time working closely with someone he or she would not have picked as a business partner. However, if the partners bought an insurance policy on the other valued at what their business is worth, they can by the deceased heirs interest in the business.
Again you need an experienced estate planning attorney to prepare a buy sell agreement and living trust. In all of these options you need to have accurate business valuations to make sure you have the proper amount of life insurance coverage.
