Protection Products

Business Continuation: Who are the players and what do they want?


While sole-owned businesses continue to dominate, multi-owner businesses continue to increase by record numbers year after year. Business continuation is a vital part of any business succession plan, but with multiple owners and estates involved, it can be disastrous without proper planning. The surviving owners and the heirs of a deceased business owner have wants and needs that can be fulfilled by a well written business continuation plan.

When a business owner dies, the surviving owner(s) may want total control of the business without interference from the deceased owner’s heirs. They may want a prompt transfer of the deceased owner’s interest at a fair price. They may also want the loyalty and support of employees, customers and creditors during and after the transition in ownership.

The heirs may want ongoing financial security after the loss of the deceased owner’s salary and benefits. They may want a prompt settlement of the deceased owner’s estate, including proper tax-valuation of the business interest, if it is to be sold. They may also want retention of the business by family members or a prompt sale of the interest at an attractive price.

Without a written buy-sell agreement that spells out in detail what will happen when an owner dies, UNWANTED consequences may result. These include conflicts – and possibly litigation – between the deceased owner’s heirs and the surviving owners, delays in the transition to successor ownership and delays in settling the deceased owner’s estate. In addition, there could be potential loss of customers, employees, and creditor confidence that can damage the business and force liquidation.

Your clients could avoid these consequences and find many other advantages in creating a formal buy-sell agreement. This could be the first step in assuring an orderly and successful transition in business ownership following an owner’s death. It could assure a fair price for the business interest and terms of sale that are reasonable to all parties. It could help set a value for the business interest for estate tax purposes to help avoid estate settlement delays and IRS challenges. It could also create confidence in the ongoing vitality of the business in the eyes of customers, employees and creditors. 

The Bottom Line: Creating a written buy-sell agreement can fulfill the wants and needs of surviving business owners and the heirs of the deceased business owner. 


Advanced Markets Business Succession Continuation

Split Dollar: Dead or Alive?


I can’t believe that 2004 was already a decade ago – things have changed since then! George W. was re-elected for his second term as president of the United States, a massive tsunami hit the Pacific Rim area, and Facebook was in its infancy and only available to college students.

Mixed up in all that was the start of the 2003 IRS rulings on the tax changes made to split-dollar plans – how that was lost in the mix, we’ll never know. Specifically, let’s talk about the changes to “collateral assignment” arrangements.

The IRS changed the favorable tax treatment of the premiums that were paid by the employer on behalf of the employee. These payments became considered loans, and the employee has to pay a “sufficient” interest rate as determined under the regulations, instead of the “interest free” loans that were allowed prior. If the loan doesn’t meet the adequate rate of interest, then regulations have a complex system of deemed interest flowing to the employee as income and then back to the employer as interest.*

Most companies and executives thought this was the end of the split-dollar train, but as Lee Corso would say, “Not so fast, my friend!” If set up properly, split-dollar plans still have a wide array of viability to attract and retain key employees and executives in the business marketplace. 

Split-dollar life insurance is widely used in gift and estate planning and can be an important part of the compensation package for key employees. Your clients don't have to cover all their employees – the coverage, amount and terms of the split-dollar arrangement are generally not subject to the nondiscrimination rules of the Employee Retirement Income Security Act (ERISA). Split-dollar plans can be used to:

  • Attract, motivate and retain employees 
  • Provide employees with low-cost life insurance  
  • Fund severance benefits 
  • Fund stock purchase agreements 
  • Fund nonqualified deferred compensation plans 

Put it in Practice: Don’t be afraid of something that happened more than a decade ago. With interest rates at near all-time lows, collateral assignment split-dollar arrangements might be a key to your clients’ recruitment, retention and success for the foreseeable future. Contact the Ash Brokerage Advanced Markets team to get started. 


*The Sarbanes-Oxley Act made it illegal for a company that is publicly traded to loan funds to an officer or director, and certain other key employees.  


Split-Dollar Life Insurance Advanced Markets