Connelly Decision
Planning that considers the Supreme Court ruling on Connelly v United States.
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Client Guide
Buy/Sell Planning Client Guide
Considerations to contemplate when creating a business succession plan.
Solution Snapshot
Generational Wealth Transfer
Implemented term life insurance coverage for buy/sell coverage on multiple generations, using cross-purchase to avoid complications from the Connelly decision.
Candidates
Solutions are not one size fits all. For every planning technique, there are determining factors that illustrate whether the technique will fit the planning for an individual or business. Outlined below are ideal candidates who might benefit from exploring Connelly Decision solutions.
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The Connelly brothers ignored valuation provisions during their lifetime and their Buy/Sell Agreement failed to establish a fixed or determinable price. Upon Michael’s death, his family agreed to value his shares at $3M and the estate’s tax return was filed based on this amount. The IRS disagreed and audited the return. The Connelly family appealed. The US Court of Appeals holding states the “courts thus recognize that an agreement must contain a fixed or determinable price if it is to be considered for valuation purposes.” 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 determined that the value of the business at a shareholder’s death can be increased by any life insurance proceeds that are received without an offsetting reduction for the amount of the stock redemption liability.