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Goering Center news: The death of a business owner

By Chris Brennan, CFP®

Very few people second-guess the notion of purchasing life insurance to protect their families. It’s one of many things prospective mothers and fathers do upon finding out they’re going to become parents. Yet many small business owners, who oftentimes identify their partners and employees as “family,” frequently do not have life insurance to provide their businesses with the reassurance and continuity they’d desperately need in the event of their unanticipated death.

Life insurance can be a means of helping to ensure “everything will be OK” — at least financially — in the event of an unforeseen tragedy. Individuals have been able to purchase life insurance in the United States since the 18th century. And because a significant amount of coverage can usually be had relatively inexpensively, it’s one of a few financial products most people can afford and should have. With that being said, small business owners of all shapes and sizes haven’t addressed this risk with as much fervor as they should.

Business owners spend countless hours planning. They recognize their strengths and weaknesses while constantly trying to identify outside opportunities and threats. Little do many of them know, one of the most glaring threats to their business is the unexpected death of an owner. As one might imagine, an unanticipated turn of events brings with it many uncertainties. Are the deceased owner’s beneficiaries capable of running the business? And are his or her partners willing to work with them? Is a succession plan in place whereby individuals have clearly defined roles? Would the surviving partners have the wherewithal to “buy out” the deceased owner’s heirs?

So many unknowns, right? Yet seemingly no magic bullets. A properly constructed buy-sell agreement can iron out a lot of the uncertainties surrounding the operations of the business on a going-forward basis. An agreement can define the extent to which the deceased owner’s beneficiaries may or may not be involved with the business. The agreement can also define the responsibilities of surviving partners and/or senior management. Lastly, the agreement, with the proceeds from a life insurance policy, can also provide the surviving partners with the means to acquire any stock/ownership from uninterested or uninvolved family members.

Small business owners have enough to worry about as it is. Imagine having to navigate a deteriorating economy while transitioning ownership without a well-drafted plan, or proceeds from a life insurance policy, that could provide some certainty during a time in which it may seem fleeting. We encourage you to consult your trusted advisor(s) to discuss how your business might be impacted by the unforeseen death of an owner and how planning today can allow your business to sustain throughout an otherwise tumultuous time.

Chris Brennan is a Principal at John D. Dovich & Associates, a Goering Center member organization. Reach Chris at

About the Goering Center for Family & Private Business
Established in 1989, the Goering Center serves more than 400 member companies, making it North America’s largest university based educational non-profit center for family and private businesses. The Center’s mission is to nurture and educate family and private businesses to drive a vibrant economy. Affiliation with the Carl H. Lindner College of Business at the University of Cincinnati provides access to a vast resource of business programing and expertise. Goering Center members receive real-world insights that enlighten, strengthen and prolong family and private business success. For more information on the Center, participation and membership visit