Business Planning Using Life Insurance

Business Succession

There are several ways that life insurance can enhance financial planning for your or your clients’ businesses.  From buy/sell funding to executive benefits, using discounted dollars by way of premium payments to fund certain expenses with a death benefit makes a lot of sense for many business owners.  Additionally, the cash value inside a permanent policy can be accessed to use as a living benefit.  Every business should consider life insurance solutions as part of their financial planning.

The sudden death of a business owner will likely have a devastating impact on a business, its employees, and the other owners of the business. It may also have a significant financial impact on a business owner's family. A properly structured business continuation plan (using a buy-sell agreement funded with life insurance) may help minimize the effect of a loss.

When completing business succession planning using life insurance, one must consider the Supreme Court ruling in Connelly v. U.S.  On June 6, 2024, the U.S. Supreme Court affirmed the 8th U.S. Circuit Court of Appeals’ decision in Connelly v. U.S.  This ruling determines that the value of the business at a shareholder’s death will be increased by any life insurance proceeds that are received without an offsetting reduction for the amount of the stock redemption liability.  The ruling does not affect every business owner and will not pertain to every arrangement, but it is worth reviewing at implementation of life insurance coverage for business purposes to minimize any negative impact the ruling might have.

Click here to read more about Business Continuation Planning Using Life Insurance.

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