Buy-Sell Agreement for a Family Business

Your hard work over the years has helped you build your business, and now you’re ready for a positive transition to the next generation. But a family business is not handed down as easily as other heirlooms. Without careful planning, you may not have control over the transfer of your business, and as a result, it could struggle in future years. A family business transition strategy known as a buy-sell agreement ― a contract that clearly states how the business assets should be transferred ― can give you control and help protect the future of your business.

Your business probably represents the largest and most important asset you own. Farm Bureau can help you develop a family business transition strategy today, while you and your business are healthy, to help future generations succeed.

A buy-sell agreement for family businesses allows you to establish which family members will take over the business, while treating all non-active heirs fairly. By establishing a properly funded buy-sell agreement ― funded by life insurance ― you can ensure that family members who are active in the business have the funds needed to purchase the business interests from other heirs when necessary. Equalizing the estate distribution with a family business buy-sell agreement can have many advantages:

Ensures the business will remain in the family

Preserves good will among children, since heirs will be treated fairly

Since the strategy can make the active family members’ futures more secure, the likelihood of a more profitable business can mean more dependable retirement income for you

Allows active family member(s) to operate the business without interference from inactive or non-business heirs

When funded by life insurance, annual premium payments for the life insurance policy that funds the buy-sell agreement can be less than a bank loan or installment payments to other heirs

Life insurance proceeds are generally received income tax-free

Investments and improvements to the business will belong to the business heir in the future, eliminating the need to “buy them a second time”

Non-active heirs’ inheritance will not be dependent on the active heirs’ success with the business

Language in a family business buy-sell agreement should be coordinated with estate documents, so you may want to combine your estate preservation and business strategy efforts when developing your business transition strategy. Doing so may also minimize estate taxes. Find a local Farm Bureau agent who can help ensure the success of your business for future generations.

IMPORTANT: The information and material contained on this Web site is not an offer to sell or a solicitation to buy any security or any insurance product in any jurisdiction. No security or other insurance product is offered or will be sold in any jurisdiction in which such offer or solicitation purchase or sale would be unlawful under the securities, insurance or other laws of such jurisdiction. Not all products are available in all states. Exclusions, limitations and reductions may apply. This Web site briefly highlights Farm Bureau's insurance policies and their benefits. The contract is contained only in the policy. Farm Bureau products are offered by Farm Bureau agents -- for more information about any Farm Bureau product, please contact your local agent or nearest office using the Agent Locator.


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