Buy-sell agreements are typically funded by life insurance policies purchased on the lives of each of the business owners. The amount is usually specified in a contract created with the help of an attorney. You can enter into a buy-sell agreement at any time, but it often makes sense to do so when a business is formed or when new owners are brought into the business. Because business values can fluctuate, it’s important to review the contract with your accountant at least once per year or to include a calculation method in the agreement. Also be sure the insurance coverage funding the agreement is up to date.

Business owners can also insure against the risk of becoming disabled and unable to work. In this case, disability income buyout insurance would fund the buy-sell agreement, allowing the disabled owners to be bought out, typically after a one-year waiting period.

Key Person Insurance

Key person insurance is another essential component of a smart business continuation plan. Key person insurance is life or disability insurance purchased by the business on such an employee and payable to the business. When a key person dies or becomes disabled, insurance can help make up for lost sales or earnings or cover the cost of finding or training a replacement.

 

SOLUTIONS FOR LEVERAGING YOUR BUSINESS FOR MORE RETIREMENT INCOME

 

Executive Benefits

Executive benefits help you offer your best employees a higher level of benefits and compensation, along with significant tax advantages. They also compensate for the fact that most 401(k) programs restrict the ability of executives to accumulate enough money on a tax-favored basis to fund the retirement lifestyle they desire.

Here are a few types of executive benefits that can help separate your company from the competition:

Deferred Compensation Plans (including SERPs)

This is a selective employee benefit that allows business owners to help key employees defer income and the taxes due on that income until a later date, usually retirement. The plan can also be used to provide executives with additional life and disability benefits in addition to the basic coverage that all employees receive.

One option is a supplemental executive retirement plan. A SERP is a non-qualified deferred compensation agreement between a company and select key employees in which the business agrees to provide a specified benefit amount at retirement, or should the employee die, become disabled or terminate employment. When paid, the benefit becomes taxable as income for the executive and tax deductible for the company. Some plans also promise to pay the executive’s spouse a benefit if the executive were to die before retirement. Often life and disability policies are used to help fund the payments.

Section 162 Plan

Often called “Executive Bonus Plans,” section 162 plans are a simple way to reward your top people. Under this type of plan, the employee purchases a permanent life insurance policy on his or her life. The company pays the executive a bonus equal to the premium, which is usually considered taxable income to the employee and tax-deductible to the employer. The employee controls the policy, including the death benefit and the cash value, which accumulates tax-free until it is withdrawn.

CALL ME AT (205) 578-2097 TO CHAT ABOUT YOUR NEEDS OR FILL OUT OUR ONLINE QUOTE FORM TO GET INSURANCE RATES FAST.