Personal Finance 101 – Buy-Sell Planning: Trigger Events and Payment Terms For Buyout

The most fundamental detail of any Buy-Sell Agreement is defining what circumstances will trigger a buyout.  Buyout payment terms should be carefully tailored to each triggering event.  Here are a few common triggering events and some considerations for payment terms. Death. An untimely death is almost universally included in any Buy-Sell Agreement.  Despite being the worst of all possible triggering events, death is actually the easiest event to plan for in a Buy-Sell Agreement.  Life insurance policies in connection with a Buy-Sell Agreement allow an immediate source of liquidity to fund a buyout obligation without burdening the assets or ongoing cash flow of the business.  Given the immediate source of insurance proceeds, a death buyout often occurs as a lump sum payment within a certain time period after the death of the owner.  Immediate payment can also be important for estate tax purposes if the value of the business interest will be included in the deceased owner’s taxable estate and ...

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Major Tax Change To Life Insurance And Annuities

As people in their 40’s, 50’s, and 60’s, consider their overall retirement plan, a recent tax change may affect the way they think about their retirement strategy.   It may also affect other decisions about managing the risk of needed long term care down the road.   This is one change for the positive that you absolutely will want to pay attention to for your retirement, risk management, and overall financial plan. According to Jessie Stone of the American Association Of Long Term Care, the approved changes to the Pension Protection Act included some key provisions that took effect January 1, 2010. The changes provide significant enhancements to nonqualified annuities that are coupled with tax-qualified long-term care riders. Starting with the New Year, benefits paid out of these plans are received income tax-free when used for long term care. This is unprecedented, and is expected to make long-term care planning highly attractive for an increased number of individuals. Prior to the new ...

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