It means the remaining owners can quickly and efficiently acquire the departing owner’s share and continue running the business with minimal disruption.
Buy/sell insurance benefits both the remaining owners and the departing owner. For the remaining owners, it provides funds to transfer the business share to them, ensuring that the business is not placed at risk. For the departing owner, or their estate, buy/sell insurance means that they receive funds to compensate them for transferring their business share – just as though they’ve ‘sold’ their share in the business.
There are several tax considerations that should be made when funding a buy-sell agreement with life insurance. The premiums used to fund a buy-sell agreement are not tax deductible. The payment of premiums made by a business, where the shareholder or the owner is the insured, are not considered taxable income.
The family of the deceased will receive the financial benefit however the benefit for the business is that they do not experience any financial loss.
Yes, the policy can include a benefit for the permanent disablement or serious medical trauma for a partner/director/owner.
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