Buy-Sell Agreements
Buy-Sell Agreements
A buy-sell plan is a formal contract between business owners that lays out what will happen to each owner’s share of the business upon a triggering event, such as death. A well drafted and properly funded plan can protect the owner’s family and facilitate the continuation of the business.
A funded buy sell agreement creates a ready buyer for the company, but also it places a fair market value on the company while providing the funds for the buyout. And ultimately this provides harmony between the owners and family of the owners. It removes all the uncertainty on how the transfer will happen- and you can be assured that conflicts will arise without a plan
A funded buy sell agreement creates a ready buyer for the company, but also it places a fair market value on the company while providing the funds for the buyout. And ultimately this provides harmony between the owners and family of the owners. It removes all the uncertainty on how the transfer will happen- and you can be assured that conflicts will arise without a plan
Living Buy Out
Living Buy Out
As mentioned, buy-sell agreements create an orderly transfer of the shares of a company, but typically if only one is to die. If designed properly the cash values of a life insurance contract can be used to buy or redeem shares of an owner who is still living. This creates a living buy-out and provides the living shareholder a supplemental income stream at retirement.
Key Person Insurance
Key Person Insurance
An insurance policy taken out by a company to compensate the company for the financial loss that would arise from the death or extended incapacity of a key employee
In most of the above business owner solutions, the most common form of funding is Life Insurance.
In most of the above business owner solutions, the most common form of funding is Life Insurance.
Corporate-Owned Life Insurance (COLI)
Corporate-Owned Life Insurance (COLI)
Corporate owned life insurance is an institutionally priced life insurance contract. It is specifically designed for large corporations so that it may have high early cash values. A few additional advantages include tax-free cash value accumulation, tax-free withdrawals, and tax-free death benefits. Properly configured life insurance funding solutions can afford the company the opportunity to recover all costs associated with a SERP of Deferred Compensation program, Executive Bonus Plans, Split-Dollar plans, Buy-Sell Agreements, Living Buy-out Plans, and Key Person coverages. Sometimes COLI is simply used to offset corporate expenses or improve the internal rate of return of a corporation.
Bank Owned Life Insurance (BOLI)
Bank Owned Life Insurance (BOLI)
Specially designed life insurance products purchased by banks where the bank is the owner and beneficiary of the policy. It is a tax-efficient tool that often provides higher yields than other bank assets, which helps the bank offset the high cost of employee benefits such as qualified pensions, group benefits or health insurance and can be used as a recovery vehicle when providing deferred compensation to attract and retain key personnel.
Michael Cowart Sr is the regional consultant for National Benefits Group, a nation leader in the Non-Qualified and Corporate Planning space. For more information please click here.
