Send us a text

Death creates enough emotional turmoil without adding financial chaos to the mix. Yet that's exactly what happens when business owners fail to plan properly for their loan accounts—those often substantial debts between themselves and their companies.

Most entrepreneurs pour personal money into their businesses, creating director loan accounts where the company owes them money. What many don't realize is that upon death, these loan accounts immediately become assets in their estate that must be collected. Suddenly, the business faces a potentially crippling financial obligation at precisely the moment it's already vulnerable from losing a key person. Without proper planning, this can force distress sales of business assets or even bankruptcy.

The reverse scenario can be equally devastating. When directors borrow from their company—perhaps to fund education or personal investments—their death creates a debt their estate must repay. Without liquid assets available, this could force the sale of family homes or other personal assets, adding financial stress to grieving families.

Fortunately, specialized life insurance solutions exist specifically to address these loan account challenges. These policies create immediate liquidity either for the business to repay the deceased's estate or for the estate to repay business debts. When structured properly alongside buy-sell agreements and key person insurance (keeping each as separate, distinct policies), they form a comprehensive protection system that ensures business continuity while protecting family interests.

Don't procrastinate on this critical business planning step. The modest cost of proper insurance and legal documentation pales in comparison to the potential financial devastation that unprepared businesses and families face. Connect with financial planners and legal professionals experienced in business assurance to ensure your loan accounts won't become a financial crisis for those you leave behind.

Support the show

Please subscribe to our podcast or have a look at our website
www.growthfp.co.za