Buy-Sell Agreements Funded with Life Insurance

ISR Introduction: A Buy-Sell / Business Continuation Sell agreement should be considered in every closely held business. This agreement defines the disposition of an owner’s interest in the business upon the specific triggering event such as a partner’s death, disability, retirement or other termination.  This is especially important when the owners want the business to stay with the remaining owners or family members and want a way to protect the business. A well documented, and properly funded, agreement can protect the interests of all the owners and help maintain continuity of the business after the triggering event. The agreement can take different forms, including

  1. Entity purchase or stock redemption.
  2. Cross purchase.
  3. Wait and see.

Many Buy-Sell Agreements are funded with Life Insurance. View the slide presentation and contact me to request a complimentary consultation.

Disclaimer: I do not provide tax, legal or accounting advice. I recommend qualified attorneys, accounting and funding professionals to assist in the formation, valuation and funding of your buy-sell / business continuation arrangement. 

Achieving Financial Balance

The Living Balance Sheet – innovative thinking and advanced web technology to help you achieve financial balance.
Watch the video and call me toll-free nationwide at 800-503-1972. I’ll show you how a customized financial scorecardcan help you!


Link to Living Balance Sheet

The personal savings habits of Americans have reached a four year low. (Oct 2011; Federal Reserve)
According to a March 2011 survey conducted by the Employee Benefit Research Institute, 29% of Americans have a savings of less than $1,000 while 56% have less than $25,000 saved. These troubling statistics are not without precedent. In July of 2006, Tracey Anne found that 97% of Baby Boomers did not have enough saved for their retirement. Then and now, Americans are not being proactive about planning for retirement. 55% of Americans did not save one penny in the prior year, according to FINRA Investor Education Foundation in December of 2010. But poor savings habits are just the tip of the iceberg. American personal debt is near an all-time high, (Oct 2011; Federal Reserve) including $772 billion in outstanding credit card balances. (Q2 2011 Federal Reserve, The economic impact is far-reaching. Over 2.32 million Americans applying for mortgages have been rejected. (Nov 2011 The Washington Times, MBA) The average student graduates with $23,186 in debt. (Spring 2011 Fed Reserve Bank of Richmond) College students collectively owe more than $1,000,000,000,000. (Oct 2011 USA Today, Federal Reserve Bank of New York) Additionally, more American filed for bankruptcy than graduated from college and filed for divorce. (Bankruptcy: 2010 U.S. Court System) (Graduate: 2012 2010 Census, 2009 Data) Due in large part to heavy debt, 42% of Americans lives paycheck to paycheck. (Aug 2011 Survey) Spending is another factor. 55% of Americans spend more than their annual income. (Dec 2010 FINRA Investor Education Foundation) 10,000 baby boomers will turn 65 years old today and everyday for the next 18 years. (Dec 2010 Pew Research Center) It is important that baby boomers and younger Americans alike plan for retirement. According to a June 2011 study by the Urban Institute, Social security will provide an annual income of $26,000. When you consider that the U.S. poverty line for a family of 4 is $22,300, (2010 Census, U.S. Census) $26,000 is not enough for a secure retirement. Referencing back to the 2006 findings from Tracey Anne, not much has changed with regard to American retirement planning. The study found that 62% of Americans would retire with less than $25,000, 35% with less than $100,000, and only 2% with an adequate pension or retirement account. It is imperative that Americans reverse this trend by being proactive about retirement planning.

The Living Balance Sheet® and the Living Balance Sheet® Logo are registered service marks of The Guardian Life Insurance Company of America (Guardian), New York, NY. The graphics and text used herein are the exclusive property of Guardian and protected under U.S. and International copyright laws.Guardian, its subsidiaries, agents or employees do not give tax or legal advice. © Copyright 2005-2014, The Guardian Life Insurance Company of America

Dead Peasants Insurance and What This May Mean to You


For many years, companies have purchased and owned life insurance policies on key personnel considered essential to the business.  In the event of a key person’s death the Company-Owned-Life-Insurance (COLI) policy would pay a tax free benefit to the business – to help fund the business through the transition, recruit a replacement, buy out the deceased’s interest – and so on.

In 1986, following changes in the tax law, corporate employers could purchase policies on masses of lower-level employees, sometimes without the employees’ knowledge or consent. When an insured employee died, the company received the death benefit. A tax free windfall.  A consultant to grocer Winn Dixie  famously referred to these individuals in a 1996 memo as “dead peasants.” (Ref: Dead Souls by Nikolai Gogul)

Soon, media like Wall Street Journal and Good Morning America began reporting on the practice.

Eventually, within the Pension Protection Act of 2006,  those 1986 rules were updated stating the death benefit paid on company owned policies could remain tax free but with new requirements:

  • The employee must, prior to the issuance of the insurance contract, receive written notice of and provide written consent to, the employer’s intent to insure their life.
  • Meet one of the Specified Exceptions.  (Consult your legal and tax professional regarding the exceptions)

How the 2006 Rules May Affect Your Business

If you own your business with one or more partners, you likely have a Buy-Sell Agreement and the business may agreed to fund that agreement via life insurance policies it pays for and owns on each partner.

Q: Did each partner, at the time each policy was issued, receive written notice and sign a Notice and Consent Life Insurance Form?

Q: Does the business file annually with the IRS the Notice and Consent Life Insurance IRS Form 8925?

The answer to these questions will help determine whether a death benefit paid to the company is tax free or not.

Not sure?  A policy review or call to your insurer can confirm whether your policy paperwork is in order.

Disclaimer: I do not provide tax, legal or accounting advice. I recommend qualified attorneys, accounting and funding professionals to assist in the formation, valuation and funding of your buy-sell / business continuation arrangement. 

As an independent licensed Life Accident and Health Insurance professional, I represent several Life Insurance Companies authorized to conduct business in New York.  For more information about how affordable insurance can protect your assets and provide you greater control over your financial planning, please contact me at (518) 346-2115 for a confidential and complimentary consultation.

A Quick Summary: Term Life Insurance

In this brief Paramus Post guest article, the writer points out how term (temporary) life insurance compares to whole life (permanent) protection.

Holding both resident and non-resident licenses, I am available to answer your life insurance policy questions. Call 800-503-1972 or Schedule a Complimentary Consultation

Unclaimed Life Insurance Benefits?

Life Insurance

New York State Department of Financial Services announced $386 million of unclaimed life insurance benefits has been paid to over 25,000 New York residents.

Previously, if a family member did not know there was a life insurance policy, or forgot to file a claim, the benefit went unpaid.  Unclaimed money is transferred to the state for safekeeping until heirs step forward to claim the benefit.

New York State has a free online policy finder to help residents locate lost or misplaced life insurance policies or annuity contracts.

Note:  Ask me about the Emergency Response System. As a licensed Life, Accident and Health Insurance professional I use the ERS to advise your beneficiaries and designated family members of your protection decisions. Please call me at 1-800-503-1972 or Book an Appointment on my calendar for a complimentary and confidential consultation.

Get the Basics on Indexed Annuities

When considering your plan for retirement, indexed annuities can add balance and give you some peace of mind— no matter what happens on Wall Street.

To help us understand the different product features of indexed annuities IALC (*) created this helpful video that explains the ins and outs of the indexed annuity product to provide the facts (without the sales pitch) so you can feel confident and assured in planning for your future.

Check it out and be sure to share with family and friends. After all, everyone should feel secure in his or her financial literacy.

As a licensed Life, Accident and Health Insurance professional, I can help you find an Indexed Annuity product that meets your needs. Please call me at 1-800-503-1972 or Book an Appointment on my calendar for a complimentary and confidential consultation.

(*) The Indexed Annuity Leadership Council (IALC) was formed in 2011 with a commitment to providing complete and factual information about the use of indexed annuities as a part of any balanced financial plan. IALC is a consortium of four life insurance organizations, NAFA and producers.
IALC’s mission is to help educate consumers, the media, regulators and industry professionals about the benefits of fixed indexed annuities. Namely, that these products provide a source of guaranteed income, principal protection, and interest rate stability in retirement as well as balance to any long-term financial plan.

Buy-Sell / Business Continuation Plans Part 2 of 5


Benefits of Buy-Sell / Business Continuation Planning

Part 2 of 5
Click here and a mp3 audio narration will open in a new window

  1. Guarantee a Buyer – A Buy-Sell agreement benefits the selling partner’s family by providing a guaranteed buyer.  And, the remaining partners are protected against the sale of a partner’s interest to an outsider.
  2. Create Liquidity – Upon a triggering event (death, disability, retirement, etc.) the business partner’s family has a need for cash to pay tax liability and other expenses.  A quick sale of the partner’s business interest can often result in the family receiving less than fair market value. A well documented, and adequately funded, buy-sell arrangement provides the liquidity the partner’s family will need.
  3. Fair Selling Price – The Buy-Sell Continuation Agreement will state how the business is valued now and in the future. This helps determine the amount of funding required to fulfill the agreement.   This also reduces the risk of costly valuation disputes among partners and families.
  4. Harmony – “Meet your new partner, the spouse.” Business partnerships are often formed between friends.  Maintaining harmony can become a challenge difficult after your partner’s family takes his or her spot in the business.  A Buy-Sell / Business Continuation Arrangement protects the owners and the business from challenges that arise when your deceased partner’s family joins the business.

In this video, an Orlando based attorney discusses the importance of planning for the departure of a business partner:


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Disclaimer: I do not provide tax, legal or accounting advice. I recommend qualified attorneys, accounting and funding professionals to assist in the formation, valuation and funding of your buy-sell / business continuation arrangement.