Certified public accountants occupy one of the most trusted seats in the financial lives of business owners, medical professionals, solo practitioners, and self-employed clients. They see the numbers, understand the cash flow, and prepare the tax returns. Yes, tax preparation and business analysis matter. But for many successful business owners, the larger question is this: After years of hard work building their practice, a client base, a reputation, and a retirement plan tied to future business value, what happens if the owner becomes too sick or injured to work?

For many small businesses, the owner is the engine. If that engine stops, revenue can stop almost immediately. Rent still comes due. Payroll still must be met. Utilities, employee benefits, professional liability coverage, loan payments, software, bookkeeping, and other routine overhead expenses continue. The owner’s personal household bills such as the mortgage or rent, utilities, groceries, and car payments don’t stop either. Retirement still needs to be funded.

This is where a coordinated relationship between a CPA and a qualified insurance and financial adviser can become extremely valuable. The CPA helps the client build and grow the business. The adviser helps the client protect income, continuity, and the retirement strategy that business is supposed to support.

Protecting the business 

Business overhead expense insurance is designed for a specific purpose: helping keep the doors open when a business owner becomes seriously ill or injured and cannot work. Unlike personal disability coverage, business overhead expense insurance is not intended to replace the owner’s personal income. It's designed to reimburse eligible business expenses, such as payroll for nonowner employees, payroll taxes, employee benefits, office rent or lease payments, utilities, professional liability insurance, commercial loan payments, etc.

For CPAs, business overhead expense insurance should be of particular interest because it fits naturally into conversations about business continuity, cash flow, and deductible business expenses. These premiums are generally treated as deductible business expenses.

The practical point is simple: If a CPA helps a client build a profitable practice, but no one has addressed how the business would survive a prolonged disability, that client’s business value, employees, family income, and future tax revenue may all be at risk.

Protecting the owner’s paycheck

Separate from business overhead expense insurance is individual disability income insurance. 

While business overhead expense insurance protects the business, disability income protects the owner’s personal paycheck. Coverage can replace a very high percentage of after-tax, take-home income when a disability prevents the owner from working. When premiums are paid personally with after-tax dollars, benefits are generally received income-tax free.

If personal cash flow collapses, decisions can become emotional and urgent. Assets may be liquidated at a loss. Debt may increase. Retirement savings may stop. Selling the business may be off the table. For the CPA, the loss is not only a personal concern for the client; it may also mean the loss of a long-standing business relationship and recurring professional revenue.

Retirement planning 

Another area where CPAs can add value is by recognizing when high-income clients need alternatives beyond the usual retirement planning tools. Many successful professionals earn too much to contribute directly to a Roth IRA. Too often, the conversation ends there, but it doesn’t have to.

A properly structured life insurance retirement plan using permanent cash value life insurance, such as indexed universal life, may provide a very powerful alternative. A high percentage of Fortune 500 CEOs use this strategy because they are in this exact predicament. 

Indexed universal life, if properly structured, can provide tax-free distributions not only during retirement years, but also before age 59 1/2 with no 10% early withdrawal penalties by the IRS. This can be attractive to business owners who may need access to liquid cash when faced with an emergency or opportunity. Indexed universal life has other advantages over Roth IRAs, such as high contribution limits. They are designed to capture and lock in the annual gains of a competitive index, such as the S&P 500 during up years with guaranteed zero losses in down years.

Guaranteed lifetime income annuities also can help clients create a “personal pension,” by using retirement assets to determine a predictable income the client and their spouse cannot outlive. They can use the future proceeds from the sale of their business or practice to fund the annuity as well.

CPA, adviser partnerships

The right referral partner should not be a generalist dabbling in advanced planning. CPAs should look for advisers with experience, specialization, strong carrier access, client testimonials, professional credibility, and a clear process. They should also insist on a no-encroachment relationship. The CPA owns the tax returns, bookkeeping, entity guidance, cash-flow analysis, and the broader accounting relationship. The adviser’s role is to help protect the client’s income, business continuity, legacy, and retirement income strategy.

Just as important, the adviser should be willing to send the client back to the CPA so they can review any professional recommendations and provide feedback. That protects the client, respects the CPA relationship, and creates a more coordinated planning experience.

From a business owner's perspective, the question isn't whether their CPA should become an insurance expert — they shouldn't have to. The better question is whether they deserve access to one. If the answer is yes, then building a relationship with a seasoned specialist in disability income, business overhead expense, guaranteed income, and advanced life insurance-based retirement strategies can help the business owner protect what they have worked so hard to build.

A good CPA helps a client grow the business. A strong planning team helps make sure the client can keep it.

Todd Radwick, principal of Radwick Financial Group LLC, is an insurance and financial adviser. He can be reached at 509.679.4814 or [email protected].