Living Buy Out Coporate
Shareholders of a private corporation willing to plan for future funding need today. Desire to ensure smooth transition of business at retirement. Want to implement shareholders’ agreement with buy-out provisions at retirement. Majority of shareholders under age 50. Corporation with funds available to invest.
Corporation overfunds a life insurance policy(ies) on a shareholder to create cash values by retirement. Assign policy as collateral for bank loan. Corporation borrows to fund the buy-out. At death, insurance proceeds repay debt and excess is paid to the corporation.
Compare cost of life insurance to a taxable investment to fund the buy-out of a shareholder at retirement.
Cash values grow tax deferred.
Borrowed funds received tax free.
Loan interest may be deductible.
Interest may be added to
Loan repayment deferred until
Established lending relationship
with Manulife Bank.
Premiums paid with cheaper
corporate after-tax dollars.
Proceeds generate credit to
Capital Dividend Account.
Life insurance can fund buy-out
on premature death.