Buy-Sell Agreements

 

As a partner or co-owner of any business, you've spent years building a valuable financial interest in your company. A buy-sell agreement can ensure your surviving family has the necessary funds for the sale of your business interest. One of the most-used methods you should consider is life insurance. The life insurance that funds your buy-sell agreement will create a sum of money at your death that will be used to pay your family or your estate the full value of your ownership interest. This strategy can also be called business continuation.

 

How it works

 

When funding a buy-sell agreement, either the company or the individual co-owners purchase life insurance policies on the lives of each co-owner or partner (but not on themselves). If the partner were to die, the policyowners (the company or co-owners) receive the death benefits from the policies on those lives.

 

That money is paid to the surviving family members as payment for the partner's interest in the business. If properly administered, the surviving family gets a sum of cash they can use to help sustain them after the partner's death, and the company has ensured its continuity.

 

Advantages of using life insurance

 

• Life insurance creates a lump sum of cash to fund the buy-sell agreement at death

• Life insurance proceeds are usually paid quickly after your death, ensuring that the buy-sell transaction can be settled quickly

• Life insurance proceeds are generally income tax free; a C corporation may be subject to the alternative minimum tax (AMT)

• If sufficient cash values have built up within the policies, the funds can be accessed to purchase your business interest following your retirement or disability

 

Further information about how a buy-sell agreement can work for your situation can be obtained by contacting one of our licensed representatives. There is never any cost or any obligation.