Buy-sell agreements: what you’d owe if your partner died tomorrow
A buy-sell agreement is a contract between business owners that says who buys an owner’s share, at what price, and with what money if that owner dies, becomes disabled or leaves. Most are signed once and never updated, so the price and the insurance behind it fall far behind what the company is worth today.
By Greg Garone, CEPA® · Published by Morrowgate Private Wealth · Last reviewed October 2026
Buy-sell gap calculator
Five numbers. Rough estimates are fine. Nothing is saved or sent.At today’s value, your partner’s family is owed
That would have to come from company cash, a loan, payments to the family over years, or your own pocket.
If that fixed price still controls, your partner’s family receives $1.5M for a stake worth $6M. That $4.5M difference is what families take to court.
Illustration only, based on the numbers you entered. Doesn’t account for valuation discounts, taxes, payment terms or your agreement’s exact formula.
Two partners, one agreement from 2019
Mike and Dan each own half of a Rochester HVAC company. In 2019 their attorney drafted a buy-sell that valued the company at $3M, and each bought a $1.5M policy on the other.
By 2026 a private equity group offers $12M. Then Dan has a heart attack. His half is now worth $6M. Mike has $1.5M of insurance and an agreement that says $1.5M is the price.
Dan’s widow hires a lawyer and argues the 2019 price no longer reflects what the stake is worth. Mike faces months of dispute with his late partner’s family while trying to run the company, and any settlement above $1.5M comes out of his own pocket. Neither of them did anything wrong. They just never looked at the agreement again.
Three ways a buy-sell agreement fails
The price is stale
A fixed dollar price, or a “we’ll update it every year” clause nobody followed. Either one side overpays or the other gets shortchanged.
The money isn’t there
Insurance sized to the old price, policies that lapsed, or nothing for disability, which is more likely before retirement than death.
It doesn’t match the estate plan
The will leaves shares to a spouse or trust the agreement doesn’t allow, or the estate needs cash the buyout terms pay out over ten years.
What usually fixes it
- A price formula or an annual appraisal, not a fixed number
- Insurance re-sized to today’s value, plus disability buyout coverage
- A second look at cross-purchase vs company-owned policies after Connelly
- Estate documents that leave shares the way the agreement requires
Questions for your attorney
- What price would our agreement use if one of us died this year?
- Is it funded at today’s value, and what happens if one of us is disabled?
- Do our wills and trusts leave our shares the way the agreement says?
Buy-sell agreement questions
What is a buy-sell agreement?
A contract between owners that sets what happens to an owner’s share after death, disability, retirement, divorce or departure: who can buy it, at what price, and how it’s paid for.
What’s the difference between cross-purchase and entity redemption?
In a cross-purchase, the owners buy each other’s shares, usually with policies they own on each other. In an entity redemption, the company buys the shares back with policies it owns. The tax results differ, especially after the 2024 Connelly decision.
Does an LLC need a buy-sell agreement?
Often the buy-sell terms live inside the operating agreement. If yours says nothing about death or disability, default state rules apply, which may not be what either owner wants.
How often should a buy-sell agreement be reviewed?
Whenever the company’s value changes meaningfully, an owner’s family situation changes, or tax law changes. Many advisors suggest a look every two to three years.
Bring your agreement. We’ll read it with you.
A 30-minute video call with Morrowgate Private Wealth’s Greg Garone, CEPA®, wherever you are in the U.S. We’ll look at your price, your funding and how it fits your estate plan, then work with your attorney on anything that needs changing.
Greg doesn’t sell insurance. When coverage needs to change, we refer you to a licensed insurance professional and coordinate the rest.