Broker Check

Corporate / Business

Old Carolana Group’s knowledge of corporate and business owned life insurance has helped correct or create a plan that is structured correctly and legal.  Business owners can use properly structured life insurance as a valuable benefit to attract and retain employees as well as protecting their company, family, partners and key employees from an unexpected death.  One of the mistakes we have helped clients correct or avoid when structuring business owned life insurance is “The Unholy Trinity”. “The Unholy Trinity” exists when three different parties are designated as owner, insured, and the beneficiary of a life insurance policy. When the insured dies under those circumstances, the policy proceeds are considered to be a gift from the owner to the beneficiary causing a tax issue. The solution is very simple, and Old Carolana Group knows how to structure your plan to avoid having a gift taxation.  Key person strategies, buy-sell agreements, and split dollar strategies are some of the corporate structured concepts we can help business owners with.

Buy-Sell Agreements

A buy-sell agreement is a legally binding contract that assures the seamless transfer of ownership upon the death of an owner. Depending on the type of agreement, the other owner(s) or the business itself are obligated to purchase the deceased’s business interest, and the beneficiaries of the decedent’s estate are obligated to sell the decedent’s share of the business at a predetermined price. One of the best ways to fund a buy-sell agreement is with life insurance. A life insurance policy provides a federal income-tax-free ource of funds with which to purchase the deceased owner’s interest in the business.

Key Person Agreements

The loss of a key employee can severely impact the business until a replacement is found. Help protect your company with key person life insurance.  Key person life insurance provides coverage on the life of an owner or other highly valued employees. The company owns and pays the premiums on the policy and is named as the beneficiary.  If a covered employee dies while the policy is in-force, the business receives the death benefit.  You should consider key person life insurance if the financial future of your company depends on an employee’s specialized skills, knowledge or influence.

Premium Financing

Premium Financing is an effective planning strategy for high net worth individuals, corporations, or partnerships to obtain and pay for the life insurance they need without needing to liquidate a portion of their assets. It involves an arrangement through which the owner borrows money at a competitive interest rate from a third-party lender to pay for their life insurance.  A well-designed and properly implemented premium financing strategy can strengthen an estate or business plan. By leveraging a lender’s capital rather than your own to pay annual premiums, you retain a significant amount of capital you can use to maintain or make investments or preserve your savings or cash flow needs.

Cash Balance Plans

A cash balance plan is a defined benefit plan that provides a contribution based on a percentage of salary and credits a rate of return on the contribution. Business owners love cash balance plans because it is considered a hybrid plan that combines the large contribution limits of a defined benefit plan with account balances that look like a defined contribution plan.  A cash balance plan can be a centerpiece for attracting and retaining employees while providing large contributions for the owner and tax deductions for the business.      

Split Dollar Agreements

High-quality employees provide a competitive edge that can help take your business to the next level. An employer-sponsored, split-dollar life insurance arrangement can help you attract and retain your industry’s top talent and stand out as an attractive employer.  A split dollar life insurance plan is an arrangement between two parties (an employer and an executive employee) who share a permanent life insurance policy’s premiums, cash values and death benefit. Generally, the employer has the cash flow to fund a majority of the policy’s premiums, and the executive has a need for life insurance protection to help protect his or her family.

Business Succession Planning

A life insurance policy is often the cornerstone of a business’s succession plan.  In many businesses, some family members are actively involved in the company, while others are not.  Splitting a business equally among family members regardless of their involvement can put family members at odds potentially causing conflicts that interrupts the flow of business.  One way to prevent conflict, is with a life insurance policy.  A life policy as part of your estate plan, can provide a death benefit to those family members who are not involved in the company.  The death benefit can be equal to the value of the business you leave to the family members who are involved and who will likely take over company ownership.

Contact OCG for Help Designing and Structuring your Business Plan

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