Buy/Sell Agreements

[joshril]

I don't know how you want someone to respond, but I do quite a bit of buy sell work. One of the things to keep in mind when working this size case is the estate consequences. We often use indirect funding, using less than market value for the agreement and finding the difference in an estate tax efficient manner. Large cases like this have lots of twists and turns before they ever close.

Good tip. Estate consequences are a huge consideration as you mentioned.

Blue, I've seen you post on several threads in the life forum... I know you're a seasoned agent, but what type of feedback do you have on prospecting for these types of cases?

This is going to be the largest life case I've done, and it's going smoothly, but I'd love to find myself with more cases like this. Currently my marketing for life insurance is very reactive and I'd like to be more proactive. I'm basically just cross-selling life products to my health book...

 

[bluemarlin08]

The best way to market is for your clients to be happy with your work and refer you to others. In addition, prove to the attorney and CPA that you know your stuff and they might refer you to others. My best sources have been the attorneys I work with.
These cases are hard to get to and don't come along all the time. Good luck, if you want any second opinions feel free to pm me.

 

[LGilmore]

Go through this one first before you start thinking about your next elephant. This case should educate you a bit. You'll how long these can take. Questions are going to pop up about estate issues, possibly insurability issues as well. I think after you finish this one, you'll have a better idea of what it takes to work the market. Experience is a great teacher... good luck.

 

[Bob_The_Insurance_Guy]

The frustrating part, for those of us who just want to learn from others, is that I had to read through twelve posts, before I got to a post with some substance.

I think asking for advice is not a bad thing. Any way we can leave our egos at the door, so to speak? It's getting more and more difficult to simply have a question and answer type of correspondence here.

Yes, there was an answer to the question - eventually.

I've started a Yahoo group two years ago, and have thought seriously about reviving it, if all I'm going to see here is personal attacks.

As an independent agent, I like listening to what works, and doesn't work, for others. I've been in the business for eleven years, and do some things well, and some I either split with an expert, or farm out to someone. It still would be nice to learn about different marketing/selling ideas.

My two cents worth.

 

[padthaiforlunch]

I don't know how you want someone to respond, but I do quite a bit of buy sell work. One of the things to keep in mind when working this size case is the estate consequences. We often use indirect funding, using less than market value for the agreement and finding the difference in an estate tax efficient manner. Large cases like this have lots of twists and turns before they ever close.

Thank you for making a good post.

Please elaborate on indirect funding. Also, thanks for the reminder of the estate consequences -- it is a great opportunity to build your reputation as an expert and provide value-added service.

 

[somarco]

Estate consequences are a huge consideration as you mentioned.

Especially if current tax law is allowed to sunset in 2010.

Or, if the budget is not balanced by then. (Yeah, like that will happen).

As for finding more cases, networking with attorney's, accountants and even P&C agents is a source.

 

[joshril]

Especially if current tax law is allowed to sunset in 2010.

A $1,000,000 exemption is nothing... everyone will be stuck with estate taxes...

 

[somarco]

A $1,000,000 exemption is nothing... everyone will be stuck with estate taxes...

Everyone is an exaggeration. A large number of estates are under $100k.

But if it reverts back to the old limit (believe it was $250k) then quite a few folks are screwed.

 

[Franz Kafka]

I am working on the life insurance portion of a buy/sell agreement for an old family friend of mine. This is going to turn into a rather profitable case as the business is valued at over $10,000,000.

Does anyone actively market funding for buy/sell agreements? How do you go about doing it? Working with attorneys, etc.?

Any input would be appreciated.

I'm no pro at this but I've found having a CVA (Valuation Accountant) partner to be helpful. E.g. A S-Corp with 2 50/50 partners worth $2mm - the partner who quits/retires first will NOT get $1mm because no one would pay $1mm for non-majority (50%) share of $2mm business. In short there are no set ways to determine a value of a business or how to make payments for the shares. They can be as creative as they want to suit their own particular situation.

I usually just ask to see their buy/sell agreement, make a copy and study it - they are pretty easy to understand. I then go over each paragraph with both partners present. Almost always there are points neither of them ever knew existed. A business attorney will just sell them a generic b/s contract but you can show them value by explaining it to them in a language they understand. Once they understand what they have agreed to do they will be more open to funding it. JMO.

 

[xrac]

The frustrating part, for those of us who just want to learn from others, is that I had to read through twelve posts, before I got to a post with some substance.

I think asking for advice is not a bad thing. Any way we can leave our egos at the door, so to speak? It's getting more and more difficult to simply have a question and answer type of correspondence here.

Yes, there was an answer to the question - eventually.

I've started a Yahoo group two years ago, and have thought seriously about reviving it, if all I'm going to see here is personal attacks.

As an independent agent, I like listening to what works, and doesn't work, for others. I've been in the business for eleven years, and do some things well, and some I either split with an expert, or farm out to someone. It still would be nice to learn about different marketing/selling ideas.

My two cents worth.

I agree with you. There is way too much in the way of personal attacks and garbage. I like things more civil and informative. The other stuff waste too much time!