With Ben Corriveau (Founders Wealth) & Martin Ochwat (COO, Dundas Wealth)
If your business partner died tomorrow, what would happen — not to their family, but to your business? Who owns their half? Can you afford to buy it? Do you even have the right to?
Most business owners Martin talks to don't have an answer. Or worse, they have an answer they think is right but often isn't. In this episode of Keep What You Build, Martin Ochwat sits down with Ben Corriveau, a licensed insurance advisor and partner at Founders Wealth in Toronto, to break down exactly what happens when a partner dies — and how a funded buy-sell agreement prevents the chaos.
When a business partner dies, their ownership shares don't evaporate. Those shares are a real asset with real value, and like any other asset, they pass to the estate of the deceased — typically controlled by the surviving spouse.
"The deceased partner's shares do not disappear. Those shares are a real asset with real value. They pass to the estate of the deceased."
Suddenly, the surviving business partner doesn't just lose their co-founder. They may experience a drop in revenue, bank covenants may be triggered, employees get nervous, and the business faces a crisis that could have been prevented with a simple plan.
A common misconception is that the deceased partner's spouse might step in and help run the business. Ben is clear: that almost never happens.
"99% of the time, the spouse does not want to be in the business, doesn't want to run the business, doesn't understand the business. They simply want what's owed to them — which is liquidity."
Without a clear path to liquidity, tension builds immediately between the spouse and the surviving shareholder. A healthy, profitable business can collapse — not because the business failed, but because nobody planned for this scenario.
Many business owners assume their shareholder agreement or partnership agreement covers them. Ben explains why that's only half the picture: the agreement spells out what should happen, but it doesn't provide the money to make it happen.
"Unless there's funding attached, it's just a legal intention of what should happen."
Without funding, the surviving partner faces impossible choices: take on massive debt, sell the business at a discount, or bring in outside investors on terrible terms. Ben has seen all three play out — none of them end well.
Life insurance creates the most cost-effective, most tax-efficient structure to fund a buy-sell transaction. Here's how it works in practice:
If two partners own a business 50/50, two life insurance policies are placed on each partner's life, owned and paid for by the corporation.
If a partner dies, the insurance pays out to the corporation — tax-free. This provides the liquidity needed to complete the buy-sell transaction.
The death benefit flows through the Capital Dividend Account (CDA), allowing the corporation to pay the deceased partner's family tax-free. The surviving partner retains 100% control. No debt, no fire sale, no outside investors.
For a 50-year-old business owner needing $500,000 in coverage, the cost is roughly $140/month. As Ben puts it: for the cost of a gym membership, you avoid a six-figure crisis.
One of the most powerful aspects of this structure is the tax treatment. In Canada, life insurance is one of the few financial tools that moves money completely tax-free. The death benefit enters the corporation without tax, gets credited to the Capital Dividend Account, and is then paid out to the family as a capital dividend — also tax-free.
"Money comes in tax-free, and money goes out tax-free. It's a completely tax-free transaction from start to finish — as long as it's structured properly."
Ben explains the two main ways to structure buy-sell insurance funding:
Cross purchase: Each partner personally owns a life insurance policy on the other partner. When one dies, the surviving partner receives the death benefit directly and uses it to buy the deceased partner's shares. Works cleanly for two partners but gets complicated with three or more.
Entity purchase (corporate ownership): The corporation owns the policy on each shareholder and is the beneficiary. When a partner dies, the corporation receives the death benefit and redeems the shares. Simpler from an administrative standpoint, and the death benefit flows through the CDA for tax-free distribution.
Which structure is right depends on how your buy-sell agreement is drafted, your corporate structure, and your tax situation. This is not a DIY decision — it requires an advisor working alongside your lawyer and accountant.
Ben also covers two often-overlooked risks that every business owner should consider:
Key person insurance: If you have a key employee — say, someone generating 60% of your revenue — and they die or become disabled, the financial impact is devastating. Key person insurance replaces that financial impact and gives the business runway to recover.
Disability insurance: The chance of experiencing a disability during your working years is roughly four times higher than death. Yet most business owners overlook it entirely. A disability can trigger a buy-sell just like death — but the definition is more complex and the planning requires its own attention.
"The chance of having a disability occur in your lifetime is much higher than a lot of people expect. It's something that's usually more overlooked than life insurance, but it's something we absolutely need to address."
Ben shares a real client example: two equal shareholders in a company valued at $3.6 million. Each partner's share was worth $1.8 million. The risk was clear — if one partner died, where would $1.8 million come from to buy out the spouse?
The solution: two term-20 life insurance policies, one on each shareholder. Cost? Under $200/month for each policy. They took care of a $2 million risk on each partner, guaranteed for 20 years, and created a clean transaction that fit within their buy-sell agreement.
"I asked them: where does $1.8 million come from if your partner passes away? And do you want to be business partners with their spouse? That's a no every single time."
If you have a business partner and any of the following are true, you need to act:
You don't have a buy-sell agreement at all — this is the most urgent gap. You need a lawyer to draft one and an insurance advisor to fund it.
You have an agreement but it's not funded — the agreement is just a legal intention without money behind it. Get it funded with life insurance.
You have a funded agreement but haven't reviewed it in years — your business value may have grown significantly since the agreement was signed. The coverage may no longer match the actual value of the shares.
As Ben says: it takes about an hour to figure out, and then you don't have to think about it ever again. A small amount of planning now prevents a massive problem later.
Book a free strategy call with Dundas Wealth. We'll review your partnership structure, check your existing agreements, and tell you honestly whether you're actually protected — or just on paper.
Book Your Free Strategy CallFree. No commitment. Bring your business partner if you'd like.