Life insurance is a powerful tool by itself, and also when used alongside an estate freeze. For many business owners, insurance provides the only real option for dealing with the income tax that will be payable at death, short of selling the business. Once you freeze your estate, you can purchase enough insurance to pay the projected tax liability.

Life insurance has a second important use in estate planning for family business owners. Treating your family fairly doesn't necessarily (and often does not) mean treating them equally when it comes to your business. In particular, splitting the shares of a family business equally among children who have varying degrees of involvement in the business can cause problems. To avoid these problems while maintaining fairness, insurance can create an "instant estate" that can be used to provide for children who are not active in the business.

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