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Partnership Buy/Sell Life Insurance

Partnership Buy/Sell Life Insurance

Buy/sell agreements and the life insurance that funds them is all about keeping the company viable and created a smooth succession. The payout, death benefit, from a buy/sell policy goes to purchase shares from their late partner’s heirs. Arrangements like these are often set in a buy-sell agreement, one of the most essential documents in succession planning in a partnership.

 What is Buy/Sell Agreement Life Insurance?

 In a buy-sell agreement, either the business or its co-owners will purchase life insurance policies on the lives of each co-owner (but not on themselves). In the event of your death, your family will receive the death benefit from the policy to pay an agreed upon amount for the deceased partner’s percentage of ownership.

Buy/sell agreements can be funded in one of two ways:

Cross-Purchase: With this method, you and your business partner will buy life insurance on each other and you will name yourself as the beneficiary. If one partner dies, the surviving partner can use the death benefits to purchase the late partner’s share of the business.

Entity Redemption: In this plan, the business purchases separate life insurance policies on the partners and is the main beneficiary of the policy. If one partner dies, the business can use the death benefits to purchase the late partner’s shares. This is especially recommended for larger companies with more entities. If you only have one business partner, cross-purchasing may be more beneficial to you.

Advantages of Buy/Sell Life Insurance

There are many advantages of buy/sell life insurance, including the following:

  • A lump sum of cash is created to fund the buy-sell agreement at death
  • Benefits are typically paid quickly after your death, ensuring that the buy-sell transaction is settled quickly
  • Insurance proceeds are usually income tax free
  • If sufficient cash values are built up within the policies, the funds can be accessed to purchase your business interest following your retirement

 

Find the Best Agency for Buy/Sell Life Insurance

At Hinerman Group, our experts have many years of experience with buy/sell life insurance. They know what they’re doing when it comes to insuring businesses and can help you find an affordable policy that best fits your needs. To learn more about how we can help you and your business, call us today!

 

More Questions? Check Out Our Blog!

The Hinerman Group knows that every situation is unique and it can be difficult finding the best answers. Be sure to check out our blog where you will find a comprehensive bank of topics covered regarding Life Insurance. The background covered in The Hinerman Group blog will point you in the right direction and help you get your family the coverage you need.

Want to talk? Call Ed directly at (719) 539-7914 for a FREE CONSULTATION. *Ed released the fish and it went on to have a full life.

 

My 20 years of experience give me the knowledge and leverage to find reasonably priced Life Insurance for people who have been declined or are paying more than they need to.

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