Life insurance can be the lifeblood of your company, keeping its heart pumping no matter what fate befalls it. Life insurance policies can provide money to pay off estate taxes, fund buy-sell agreements or buy out a family member who is not interested in participating in the business. Moreover, insurance policies provide cash for emergencies, helping you avoid selling your firm to outsiders if it's hit by hard times.
A properly designed buy-sell agreement is only half a plan. Such an agreement should be properly funded as well, and life insurance is often the funding vehicle of choice. A major advantage of insurance is that it's the only funding medium that can be estate and income tax-free and even, in some circumstances, gift tax-free.
Business life insurance can help your company ward off any hazards resulting from your death or that of any other key participant. Each company has its own set of circumstances and requirements, which should be reflected in the way the policy is drawn up. The policies you purchase should take into account any legal, financial, tax and technical complications specific to your operation.
Try to avoid plans that necessitate additional taxes. And because tax laws change frequently, reevaluate your policy on a regular basis with your financial advisers to ensure the greatest advantage for you and your company.
Back to The Financial Aspects of Succession Planning
