Living Buy Out Partnership

Living Buy Out Partnership

Need

Partners willing to plan for future funding need today. Desire to ensure smooth transition of business at retirement. Want to implement partnership agreement with buy-out provisions at retirement. Majority of partners under age 50. Partnership with funds available to invest.

Structure

Partnership overfunds a life insurance policy(ies) on partners to create cash values by retirement. Assign policy as collateral for bank loan. Partnership borrows to fund the buy-out. At death, insurance proceeds repay debt and excess is paid to partnership.

Comparative Analysis

Compare cost of life insurance to a taxable investment to fund the buy-out of a partner at retirement.

Benefits

Cash values grow tax deferred. Borrowed funds received tax free. Loan interest may be deductible. Interest may be added to loan balance. Loan repayment deferred until death. Established lending relationship with Manulife Bank. Life insurance can fund buy-out on premature death.

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