An agreement is only as strong as its funding.
A buy-sell agreement decides what happens to ownership when an owner exits, retires, or passes. Buy-sell funding makes sure the money is actually there to execute it.
The gap most owners miss
Many businesses have a buy-sell agreement. Far fewer have confirmed it's funded. An agreement without funding can force the remaining owners to scramble for cash, take on debt, or end up in dispute, exactly when stability matters most.
How life insurance funds a buy-sell
Life insurance can provide the money needed to buy out a departing owner's share when the agreement is triggered, so it actually executes instead of stalling. Who owns the policies and how they're arranged depends on your agreement and your ownership structure, set up alongside your attorney.
Common structures
Which structure fits depends on legal and tax factors that your attorney and CPA determine. We align the insurance-based funding to the structure they establish.
- Cross-purchase: owners hold policies on one another.
- Entity purchase (redemption): the business holds the policies.
- Hybrid approaches, depending on the number of owners and goals.
Who it may fit
Buy-sell funding may fit any business with more than one owner and a desire for a smooth, fair, and pre-agreed transition. It's especially important where the owners want to avoid forced sales, outside parties, or disputes.
Coordinated by design
The agreement itself must be drafted and reviewed by a qualified attorney, and tax treatment confirmed with a CPA. Our role is the funding strategy, coordinated directly with your professionals.
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Educational only. Buy-sell agreements must be drafted and reviewed by a qualified attorney; tax treatment must be confirmed with a qualified tax professional. Guarantees are subject to the claims-paying ability of the issuing carrier. NOI does not provide tax, legal, or investment advice.