Family Income : Monk Financial Strategies Group, Houston, TX

Family Income

The Situation:

We were approached by two successful business owners that provide oilfield services in West Texas and parts of Colorado. The company generates over $200,000,000 per year in revenue. While the business partners have equal share in the company, they provide very distinct and different skill sets in its operation. As a result of their success each of the partner’s wives have the fortunate opportunity to be stay at home parents of their young children. Our discussion started when one of their key employees was recently killed in an accident while traveling through the Panhandle. This event had triggered two realizations for them, the business operations under that employee’s jurisdiction had incurred a major setback due to his absence which led to the question of “What happens to the business and our family’s interest should something happen to one of us?” They admittedly had been focused for so many years on the revenue and income process of the business that they had neglected the day to day business operations and what makes it work, the people. We soon discovered that the partners had a Buy-Sell agreement in place that left a lot to be fought over and had no proper funding source. Essentially the surviving business partner would be in business with, or indebted to, the surviving spouse for an indeterminable amount of time and the future of the company would be uncertain.

The Solution:

We first enlisted the Advanced Planning Group to assist us in helping the owners outline a suitable Buy/Sell arrangement. Upon the completion of restructuring the agreement with their counsel we funded their respective interests with an equity driven insurance policy. (This would also allow them to utilize corporate assets to fund the policy while retaining complete control over the monies.) We then identified seven key employees in the organization that help drive the company with their expertise. It was concluded that in the event of other deaths the company would find itself in a grave situation when it came to generating revenues. After identifying the monetary value of these employees, the companies implemented key person protection with the option to add “golden handcuff” provisions.

The development of this relationship eventually opened up other avenues allowing us to provide additional value to the company. This including restructuring their group benefits, voluntary payroll deduction benefits and an incentivized qualified retirement program that was easily accessible for their employees.

Can Your Family and Your Business Succeed Without You?

Certain elements of this case study have been amended and are provided for general informational purposes only. These specific examples will not be suitable for everyone. Together we can ensure that any course of action is based on your financial needs, objective, time horizon, risk tolerance and individual situation. Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.