A buy-sell agreement is a contract among business owners that, upon the death of one of the owners, requires the remaining owners or the company itself to purchase the deceased’s interest in the company according to the agreed upon terms of the contract. In addition, the deceased’s heirs are required to comply by selling their inherited interest at the previously agreed-upon price.

The best way to fund a buy-sell agreement is through life insurance. This ensures that funds are immediately available when a death occurs; plus, death benefit proceeds are generally income tax free. In addition, the funds used to buy the deceased’s share are purchased for pennies on the dollar.

 

Advantages of a Life Insurance Funded Buy-Sell Agreement

  • Establishes a valuation of a deceased owner’s interest in the business for estate tax purposes.
  • Establishes a mutually agreeable price and terms to reduce potential future litigation or friction.
  • Helps facilitate a smooth transition of management.
  • Ensures that the family of the deceased receives cash instead of unmarketable stock.
  • Protects the company’s liquidity needs at a potentially vulnerable time.

Neckerman Insurance Services understands the complexities of buy-sell insurance policies and we are here to help you protect your business, your assets and your family. Contact us today for more information!

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