Business Owner & Executive Plans
Key Person Insurance
Key person insurance is a life insurance policy that a business takes out on its most valuable employee or employees to safeguard the business. A key person is often the business owner but could also be someone who has a highly specialized role or is responsible for bringing in a large share of sales.
Sole proprietors may also opt for key person insurance to protect family members who will inherit their business. Under a key person life insurance policy, the business owns the policy, pays the premiums and is the beneficiary. If a key person dies, the business then collects a death benefit.
Buy / Sell Agreements
A buy/sell agreement, is a contract funded by a life insurance policy that can help minimize the turmoil caused by the sudden departure, disability or death of a business owner or partner.
A buy/sell agreement gives employers peace of mind knowing that their business is in capable hands should they no longer be able or want to manage it. It also:
Provides money to create a fair market value exchange
Promotes equitable and orderly transfer of wealth, ownership and management.
Guarantees heirs a buyer for assets they may not know how to manage.
Provides heirs cash to pay estate debt, expenses and taxes.
Potential benefits for business partners and employees.
Assures remaining owners that the deceased’s share of the business will not pass on to someone unsuitable.
Assures continuity for customers, creditors and employees.
Section 162 Executive Bonus Plans
An executive bonus plan (Section 162) is a way for business owners or companies to provide additional supplemental benefits to key employees or executives of their choice.
The benefits usually include life insurance policy death benefits as well as cash value accumulations that can be used as a retirement income supplement. The business can use tax deductible company funds to selectively provide valued benefits to key people.
The executive bonus plan works as follows:
The company provides the key executive with a bonus that is taxable as income to the recipient. The bonus is generally a deductible business expense for the company.
The bonus is used to purchase a whole life or universal life insurance policy that builds cash value that grows tax deferred. Access to the cash surrender value is restricted by the company until a specific date.
Our financial advisors are investment advisory representatives of Encompass More Asset Management LLC ("Encompass More"). Encompass More Asset Management LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (SEC) and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Alto Workplace Benefits is not affiliated with Encompass More.
Information presented is for your educational purposes only and should not be regarded as a complete analysis of the subjects discussed. Discussions and answers to questions do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the options presented.