A buy-sell agreement is an important tool that all small business owners should consider to ensure a smooth transition of their business at their retirement or death. Without proper planning, the sudden death of a small business owner may have a devastating impact on the business, the business’ employees, and the other owners of the business. It may also have a significant financial impact on his/her family. A properly structured business continuation plan (i.e. a buy-sell agreement) funded with life insurance may help to minimize the impact caused by the loss of a business owner for both the business and the business owner’s family.
WE WILL:
- Look at any existing buy-sell agreements you have in place
- Show different scenarios in which you can maximize the use of a buy-sell agreement
- Present funding comparisons
- Make recommendations to an attorney, if needed
FEATURES OF A WELL STRUCTURED PLAN:
- Continuity of management and control for the remaining owners
- A source of income for the decedent business owner’s family
- A captive market for often non-marketable business interests
- Liquidity to the decedent’s estate for estate taxes and administrative costs
Information above provided by Pacific Life. Neither Exponent/SMART Group Houston, Pacific Life nor World Equity Group, Inc provide tax or legal advice. Please consult your independent tax & legal advisor.
*For federal income tax purpose, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC Sec. 101(1)(1). In certain situations, however, life insurance death benefits may be partially or wholly taxable. Situations include, but are not limited to: the transfer of a life insurance policy for valuable consideration unless the transfer qualifies for an exception under IRC Sec 101(a)(2) (i.e. the “transfer-for value rule”); arrangements that lack an insurable interest based on state law; and an employer-owned policy unless the policy qualifies for an exception under IRC Sec. 101(j).