The need for buy-sell planning in small- to medium-sized businesses transcends industry, nationality, and economic barriers. In most businesses, a succession plan can be implemented with either cross-owned or entity-owned life insurance, but complex buy-sell planning sometimes requires a third-party buy-sell structure. A business continuation general partnership can manage the ownership of policies and provide tax advantages. The new 2019 transfer-for-value regulations require additional analysis, particularly for satisfying the “substantial financial relationship” test, but they appear to include language that will accommodate buy-sell planning scenarios.
Author: April Caudill, JD*, CLU, ChFC, AEP, is a business and advanced solutions director with Principal Financial Group®, Des Moines, IA 50392. She is part of the business and advanced solutions team that assists advisors with tax and legal concepts related to advanced planning and business owner needs.