The company can take into account the additional “gross” compensation for all taxes, so that the income tax of the transaction is neutral for the beneficiary (s), while deducting total tax for the companies. In addition, a LtC (Long Term Care recipination style) driver may be added, so that tax-exempt funds may be available for the performance of the contract, whether the buyback is caused by the death or disability of the business owner. In addition, the capital of the life insurance contract can be used as a tax-friendly reduction fund, which can pay the down payment in the event of a lifetime sale. The business owner enters into a sales contract with a non-owner whereby the owner agrees to sell, and the non-owner agrees to purchase the transaction after the owner`s death (and possibly other triggering events), and at a price indicated in the agreement. Lately, Ron has been thinking about what would happen to the case if he was no longer involved. He realizes that Marie, his wife, was unable to maintain the business for long. He also thought it would be difficult for Mary to sell the business for its full value. Equitable has a range of long-term and sustainable life insurance products that allow you to tailor your purchase contract to your company`s specific needs and budget. A well-written sales contract can help your business get into the right hands if you or one of your partners retires, decides to leave the company, be hobbled or die.

The buyer often has a “right of pre-emption” on any lifetime injunction of the business by the owner. This means that the owner must first offer the business to the buyer before selling it to a third party during the life of the owner, including in retirement. Only when the buyer refuses the option can the owner follow a sale to a third party. In other words, the purchase of death required under the agreement cannot be challenged by the life order of the business owner, provided the purchaser exercises the option to purchase. While this clearly limits the owner`s freedom, it assures the buyer that he will not pay the insurance premiums for nothing. The second split dollar solution: Owner`s confidence is directive (with agreement on a dollar-sharing contract). Under this structure, under Grantor Trust rules, the trust`s income is taxable to Ron, but because the Trust can be revoked, the policy is outside his estate.