NeedShareholders of a private corporation willing to plan for future funding need today. Desire to ensure smooth transition of business at death. Want to implement shareholders’ agreement with buy-sell provisions.
StructureShareholders of a private corporation are insured under a life insurance policy. Policy proceeds are used to fund the buy-out at death.
Comparative AnalysisProject fair market value of shares and compare cost of life insurance to other methods of funding the buy-out
BenefitsFunds available exactly when needed. Insurance proceeds received tax free .Flexible structure:
- Promissory note
If corporate owned:
– Premiums paid with cheaper after-tax dollars
– Proceeds generate credit to Capital Dividend Account