Actually even if the family wants to own the business both partners should enter into agreements on what happens when either dies. I can't imagine any situation where partner B wants to give equal decision-making powers to widow A as soon as partner A expires unless of course widow A was actually partner C in the business.
Key Man for a small business
- Thread starter wcShaver
- Start date
-
- Tags
- key man life
- 2,152
Hummm, I guess what you are saying is sell the funding via insurance for the Buy/Sell and damn the consequences? Since I have yet ran into the Insurance Agent pushing these plans say; "Wow Joe and Bob, let us go and find out about the taxation issue before we sign these policies!" Of course I will not hold my breath waiting to hear such a thing.
Surely I'm not a Tax Expert on businesses, yet I know enough that if the business is sold after the death of an owner, taxation is gonna be a serious issue. Plus, I'm thinking (if there is an ex IRS agent here which there was at one time can't remember who though?) that the IRS may view the taxation of any life proceeds as taxable if use in a Buy/Sell agreement.
Of course I'm not a tax expert but, some things seem obvious as in Sales and Taxes.
FWIW, I have a fairly good working knowledge of Keyman & B/S arrangements (including the funding). But reading this thread, with contradictions, false assumptions and misstating the issues, I find it challenging at best to follow.
I am not pointing fingers at anyone, but some of the advice & tactics suggested are really "out there". I have to wonder if the folks making those statements really do understand the mechanics, including funding, of these business insurance arrangements.
As for the rookie agents looking in, my best suggestion is to walk on by this thread and look for something definitive and less confusing. I really don't think you can learn what you need to learn by reading this diatribe.
I am not pointing fingers at anyone, but some of the advice & tactics suggested are really "out there". I have to wonder if the folks making those statements really do understand the mechanics, including funding, of these business insurance arrangements.
As for the rookie agents looking in, my best suggestion is to walk on by this thread and look for something definitive and less confusing. I really don't think you can learn what you need to learn by reading this diatribe.
Surely I'm not a Tax Expert on businesses, yet I know enough that if the business is sold after the death of an owner, taxation is gonna be a serious issue. Plus, I'm thinking (if there is an ex IRS agent here which there was at one time can't remember who though?) that the IRS may view the taxation of any life proceeds as taxable if use in a Buy/Sell agreement.
Of course I'm not a tax expert but, some things seem obvious as in Sales and Taxes.
Taxes are going to come into play anytime a business is sold or transfered, whether an owner is alive or dead. It doesn't matter where the money comes from to pay off an owner or an owner's spouse. That being said proper planning can alleviate or at least lessen many of the tax blows. As the great Burt Meisel says, "Somebody has to pay something sometime." Might as well use discounted dollars. The IRS is going to get theirs, the only question is how much. Seek the advice of a qualified attorney and/or CPA.
Well the company would not be worse off if the funding is provided before the buy/sell paperwork is signed. That being said, an agent would be foolish to tackle a buy/sell plan by himself. An attorney has to be involved to draw up the paperwork.
- 2,152
From expierence, most agents selling Buy/Sell simply sell them, many or most established small businesses I walk into have a Buy/Sell agreement, simply not funded and most are nothing more then paper-mill type of document from some online law/accounting website. Basically this is about as much planning that I find. If you have found different results then that is okay, I would simply suggest any agent that is planning on this course of business do so with their eyes wide open.
I have gave no advice on what a new agent should do or shouldn't do, outside of obvious flaws that I have found within most Buy/Sell agreements I have found and others have. Simply google (for beginning research) Buy/Sell, BOLI or COLI (even though if you refuse to call a pig a pig, it's still a pig!) and start reading relative information, all about the taxation, cost factors and abuses by Companies and Agents, all for a quick buck.
The mentallity I would offer up about these issues is simple. Don't place much information on that colorful insurance brochure or websites that tout how you can make so much peddling Buy/Sell and Keyman Policies. I'm not saying these policies shouldn't be sold, but there is a factors that most agents simply rather not factor in when selling them, lets face it issues get in the way of sales!
As in this example:
So since taxation is an issue you and others refuse to take into account, this is where this plan really falls apart, I hope Mrs Bob has gone out and got another policy to protect her interest on Bob's life. If the IRS steps in and levies a tax on your Insurance Proceeds (which may or may not happen) and taxes the transaction of the sale of the business (which is going to happen), which would be squarely on the back of Mrs Bob not Joe (last I look the buyer gets a deduction!), exactly how much is left out of the insurance proceeds when these event or events happens? I suppose Joe can always send Mrs Bob a case of KY to ease the pain.
Humm, you are correct, in the above example Mrs Bob is gonna pay taxes with discounted insurance dollars, I'm sure that'll ease the pain. Plus Joe is gonna buy a business from Mrs Bob with even greater discounted dollars of the premium of the life policy! Gee, I'm thinking Joe is making out like a bandit here while Mrs Bob is paying dearly from this arrangement.
Yea, if I was a spouse of a business owner, I hope my spouse wouldn't hate me enough to do this to me!
Last edited:
I completely agree! This entire thread should be marked confusing, illegal, immoral, and unethical. One of the few times I strongly feel that way.
I think me and James were talking right past each other (though not limited to us) and what would make an interesting bar conversation makes for a lousy thread. Okay, actually, it would make for a lousy bar conversation as well
Dan
- 4,132
James, you kill me...
If you found some businessmen that fall for what your doing, good for you I guess. I hope you have plenty of E&O. You may need it.
Me? I'll still do it the way I have in the past, in cooperation with the owners and their other trusted advisors.
Good luck brother....
If you found some businessmen that fall for what your doing, good for you I guess. I hope you have plenty of E&O. You may need it.
Me? I'll still do it the way I have in the past, in cooperation with the owners and their other trusted advisors.
Good luck brother....
- 2,152
Still, since you'll couldn't address key issues, I think I'll let this thread go.
Maybe I'll start another more informative selling thread for those that might actually want a chance to break into this market.
- 4,132
"Still, since you'll couldn't address key issues"
Nobody can really figure out what your key issues are as they seem to shift around quite a bit. But if it makes you feel better, sure... it's me..
Nobody can really figure out what your key issues are as they seem to shift around quite a bit. But if it makes you feel better, sure... it's me..
Similar threads
