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hi my name is Jim Evans president of gannan well security partners thank you for taking some time out of your day to watch our video our videos are to help you understand the strategies you need to help protect you your family your business and future generations those strategies will be all wrapped around retirement planning estate planning tax mitigation and asset protection I hope you enjoy today's video please don't forget subscribe to our YouTube channel follow us on twitter like us on facebook and make sure you leave comments below so that we know exactly what you want to know that's what we're here for thanks again enjoy today's video welcome back everyone my name is Jim Evans president of gannan well security partners and today we are talking about buy-sell agreements who uses them and why great question and as I always say let's jump right into it okay so we have a company we're going to call them company let's think of something really good how about ABC Wow you wonder how i came up with that name okay so ABC is owned by two people they're fifty percent partners and we're going to call them Jack and Jill I know you wonder how they come up with this stuff but it just rolls right off the tip of the tongue okay so Jack and Jill own company ABC they're relatively young in their company it's only two years old starting to make money growing but here's the thing jack is married to heather and jill is married this is will put the spouse over here and jill is married to jennifer okay all right so Jack and Jill have this company their spouses are great they're fantastic they go out to dinner they go two functions together however Jill brings up this really good point and she's like listen Jack if anything ever happens to you Heather does not know how to run our business she hasn't built it and what happens if you die you're gonna leave your fifty percent of the business to Heather well Jack's like well of course you know I own fifty percent and you know I don't you know my wife is going to depend on that money maybe my wife doesn't work maybe she does work but we're still going to depend on that money we have kids blah blah so of course I'm going to leave them half of the business to her so children's but I don't necessarily want to be in business with Heather because she doesn't know the business she's a fantastic person but knows nothing about what we do every day and Jill says in Jack would you really want to be partners with Jennifer who also doesn't know anything about the business so these people are fantastic but they're outside of the business so now all of a sudden they're going to own fifty percent of the business they going to come into work every day are they going to learn the business these are all variables that we pretty much know the answer to but it's not something that we really want to say hey listen I don't want anything to do with your spouse so what we do is we do a buy-sell agreement and basically what that means ok there's triggering events in buy-sell agreements there's there can be a number of different triggering events okay one of them can be death Jack dies Jill agrees to buy out Heather Heather agrees to sell her fifty percent share to Jack I'm sorry to Jill Jack's gone he's no longer with us we mourn jack okay so now the same would be true in Reverse so the problem is we're a relatively new company and I don't know if I'm going to have enough money either way whichever one jack or Jill is going to have enough money to buy out the other one right and to buy them out slowly to give them a salary or to cut them to k1 every year is going to reduce the amount of cash flows the business has in order to survive because you're still going to need somebody to fulfill that position that the old partner used to do so you might have to hire somebody or hire a number of different people trained do all those things very expensive if you're still paying the spouse of your late partner okay so triggering event is obviously deaf how can we do that we can buy a life insurance policy on both both wives okay and whichever one dies death benefit is paid to the other person the other person uses that to give a lump-sum cash payout to the other spouse and then that spouse says okay I got paid I got my share of the business they go on with the rest of their lives meanwhile the person that is still alive that owns the business now runs the day-to-day operations on their own they don't have to worry about cutting a check every month or every week to the the the late spouse so that's hot now what about disability well I mean this is relatively the same thing I mean let's say we have Jack and Jill right and Jack becomes disabled get to the car accident can no longer go to work can no longer function can no longer perform the duties that he needs to in order to be beneficial to him or Jill or the company in general so now Jack's home but he still owns fifty percent so now the same scenario is true Jill's gonna have to come to work every day she may have to hire a couple people to do what Jack used to do sorry train them right and then still have to cut a check to Jack every month because he owns fifty percent doesn't really seem fair to either party right so another triggering event can be the disability so you have these triggering events and you can have a number of them some buy-sell agreements have a number of triggering events that can occur that will require some type of policy be paid or some of them don't have a policy attached to them some I've actually seen buy-sell agreements where there is no funding vehicle or they're just going to start putting money away into a fund pay for this well that's very unlikely to happen unless you know that these triggering events are not going to happen for a very long time so why worry and concern yourself with putting that little bit of money and hoping that it grows when you can just turn around and insure yourself and your partner that says hey anything ever happens to me and I can't come to work you're you're you're you're going to take care of my spouse or you're going to take care of me if I become disabled but you're going to do that without actually showing money out of your pocket or out of the cash flow of the business this purchasing these two are much cheaper then the alternative which is being in business with somebody that you may not want to be in business with being their spouse or being in business with your partner who can no longer perform the duties that he or she used to so I hope you like this little quick video on buy-sell agreements why people use them how you use them and what the purpose behind in the objective of using a buy-sell agreement so I hope that helps you have any questions please feel free make a comment share call us email us however you can get in touch with us please do so again my name is Jim Evans thank you so much for watching it I cannot tell you how much it means to us that you are watching these videos we're designing them for you so I know that I sound crazy right now because I'm really really passionate about what we're doing I love making these videos because I love getting the comments I'd love to see people sharing them because this information may not pertain to you but it might just be food for thought for a friend a family member or just common conversation at the next cocktail hour so again thank you so much for watching follow us on facebook like a something i always mess these up like us on facebook follow us on twitter double tap on the Instagram and please subscribe to our YouTube channel because it's the only way that we can touch more lives than people that we already know right now so thanks again and we'll see you next time