Business Owners
Business Owner Insurance and Succession Planning
Your business is your largest asset and your most complex risk. We help closely held companies plan for ownership transitions, fund buy-sell agreements, and protect against the loss of the people who drive the business.
Closely held businesses need three forms of insurance planning: a funded buy-sell agreement so ownership transitions smoothly on death or exit, key person coverage so the company survives the loss of a critical producer, and owner-level estate planning so the business does not become an involuntary tax event. Each problem has a different solution; each solution interacts with the others. Living Prepared and Whitwell & Co. coordinate all three.
Explore Business Owner Topics
Business Succession and Key Person Planning
Integrated succession planning for closely held businesses: owners, key employees, and the continuity strategy that ties them together.
Read moreBuy-Sell Agreement Funding
How life insurance funds buy-sell agreements after Connelly v. United States. Entity redemption, cross-purchase, and the estate tax trap to avoid.
Read moreLife Insurance as Collateral & Credit Enhancement
How permanent life insurance can collateralize a business loan, satisfy a lender's key-person requirement, or back a personal guarantee.
Read moreKey Person Insurance
Life insurance on a key employee, partner, or executive whose loss would materially harm the company. Funding, tax treatment, and policy structure.
Read moreExecutive Benefits & Nonqualified Plans
Nonqualified deferred compensation and bonus plans, often funded with life insurance, that reward and retain key executives with vesting golden handcuffs.
Read moreDisability Income Insurance
Protect your earning power if illness or injury stops you from working. Own-occupation vs. any-occupation coverage, and what high earners should look for.
Read moreBusiness Valuation
Why most owners do not know what their business is worth, and how that number drives buy-sell funding, key-person coverage, and estate-tax exposure.
Read moreExit Planning
How a business exit planned years ahead uses insurance and liquidity tools to protect deal value, fund the transition, and aid tax planning.
Read moreMonetize Without Selling
How life insurance strategies can turn business value into personal liquidity and income without a full sale.
Read moreHas your buy-sell been reviewed since Connelly v. United States?
The June 2024 Supreme Court ruling changed how life insurance proceeds are treated in estate tax valuation for entity-redemption agreements. Read the full analysis.
Read the Connelly analysisWe Also Help Business Owners With
Non-Qualified Deferred Compensation
Selective retirement plans for owners and key executives, typically informally funded with permanent life insurance. NQDC plans have no contribution caps and can be designed to retain top talent and equalize benefits that qualified plans cannot reach.
Disability Buy-Out Funding
Long-term disability is statistically more likely than premature death for most working-age owners, yet most buy-sells ignore it. Disability buy-out (DBO) policies, offered by several highly rated carriers, provide a lump sum or scheduled installments after a waiting period so surviving owners can purchase a disabled partner's interest without straining the company.
Income Protection for High-Income Professionals
For surgeons, dentists, attorneys, and other specialists whose income depends on a specific skill or license, a properly structured individual disability income (DI) policy is often the single highest-leverage piece of protection they can own. We help evaluate own-occupation language, riders, and stacking strategies alongside group coverage.
Common Questions
What is the impact of Connelly v. United States on buy-sell agreements?
In June 2024, the Supreme Court unanimously ruled that life insurance proceeds held by a corporation to fund a stock redemption increase the fair market value of the deceased shareholder's stock for estate tax purposes. Every closely held business with a life-insurance-funded entity-redemption buy-sell should review its structure; many will benefit from converting to cross-purchase.
What is key person insurance and who should have it?
Key person insurance is life insurance purchased by a business on the life of an employee, partner, or executive whose death would cause significant financial harm to the company. The business owns the policy, pays the premiums, and is the beneficiary. Proceeds are used to cover lost revenue, recruit a replacement, reassure creditors, or stabilize operations.
How is entity redemption different from cross-purchase?
In entity redemption, the business entity owns the life insurance policies and is obligated to buy the deceased owner's shares. In cross-purchase, the individual shareholders own the policies and buy the shares directly. After Connelly, cross-purchase is generally the more tax-efficient structure because the insurance proceeds never inflate the company's value for estate tax purposes.
What is a non-qualified deferred compensation (NQDC) plan and how is it funded?
A non-qualified deferred compensation plan is a contractual promise to pay an executive or key employee compensation in a future year, typically retirement. Unlike a 401(k), NQDC plans have no contribution limits and can be selectively offered to a chosen group. They are most commonly informally funded with permanent life insurance on the participant: the policy's cash value grows tax-deferred, the death benefit insures against premature death, and the company can recover its cost through the death benefit. NQDC plans are widely used to retain top executives and equalize benefits for owners and high earners who are limited by qualified-plan caps.
Can a buy-sell agreement be funded with disability insurance?
Yes. Disability insurance can fund a buy-sell triggered by the long-term disability of an owner, not just death. Several highly rated carriers offer disability buy-out (DBO) policies designed specifically for this: after a defined waiting period (commonly 12 to 24 months), the policy pays a lump sum or scheduled installments that the surviving owners use to purchase the disabled owner's interest. Most buy-sells consider only death; pairing life insurance with a DBO closes the more common gap of long-term disability.
Which owner strategy solves which risk?
| Strategy | What It Protects | How It Is Funded | Who Owns It | Best For |
|---|---|---|---|---|
| Key Person Insurance | Company revenue and stability if a critical owner or employee dies | Business-paid premiums on a life (or disability) policy | The business (owner, payer, and beneficiary) | Firms that rely on one or two irreplaceable producers |
| Buy-Sell Funding | An orderly ownership transfer when an owner dies or exits | Life insurance on each owner (cross-purchase or entity redemption) | Individual owners (cross-purchase) or the entity (redemption) | Multi-owner companies with a buy-sell agreement to fund |
| Disability Buy-Out (DBO) | A buyout of an owner who becomes permanently disabled but is still living | A DBO policy that pays after a 12 to 24 month elimination period | The owners or the business, per the buy-sell terms | Partners closing the disability gap a life-only buy-sell misses |
| Executive Benefits | Retention of key executives beyond qualified-plan limits | Often informally funded with corporate-owned life insurance | Usually the employer (the executive owns it in a section 162 bonus plan) | Profitable firms rewarding and retaining select talent |
Educational comparison, not a recommendation or legal advice; structures vary and should be set up with your tax and legal counsel. After Connelly v. United States (2024), any entity-redemption buy-sell should be reviewed.
What are the risks, costs, and alternatives?
Connelly v. United States changed entity-redemption buy-sells
In 2024 the Supreme Court held that company-owned life insurance proceeds funding a stock redemption increase the company's value for estate tax purposes. Any entity-redemption buy-sell should be reviewed, and many owners may benefit from converting to a cross-purchase structure. Coordinate the fix with your CPA and attorney.
Most agreements fund death but ignore disability
For working-age owners, long-term disability is statistically more common than premature death, yet many buy-sells fund only the death trigger. Pairing life insurance with a disability buy-out policy helps close the more likely gap, though DBO benefits pay only after a 12 to 24 month elimination period.
Stale valuations and mismatched coverage
A buyout price or coverage amount set years ago can drift far from current business value, leaving a funding gap or an overpayment. Review the valuation and the coverage together at least annually, and update both as the business grows.
Tax treatment and structure are unforgiving
Key person premiums are generally not deductible, employer-owned policies carry notice-and-consent rules, and nonqualified plans are subject to IRS section 409A. Errors can make a death benefit taxable or accelerate tax to an executive, so these strategies should be designed with tax and legal counsel.
Free Buy-Sell Review
We review your existing agreement, identify Connelly exposure, frame the estate-tax liquidity question for your CPA and attorney to quantify, and coordinate the correction with them. No cost for the initial review.
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Living Prepared, LLC is an affiliate of Whitwell & Co., LLC, an SEC-registered investment advisory firm. Insurance and annuity products are offered through licensed insurance professionals. See our Disclosures.
Living Prepared, LLC is an affiliate of Whitwell & Co., LLC, an SEC-registered investment advisory firm. Insurance and annuity products are offered through licensed insurance professionals. See our Disclosures for full details.