Tag Archives: banks

Key Man Policies May Not Cover a Buy/Sell Agreement

Over the last few weeks, I’ve had a number of conversations with clients about key man insurance. Let me say at the outset that I don’t sell insurance, and have no financial stake in whether any client has coverage or … Continue reading

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7 Responses to Key Man Policies May Not Cover a Buy/Sell Agreement

  1. Frank Benzoni P.E. Retired says:

    John

    Another “Wide Awake Article” – To be advised is to be prepares, and you continually do that.

    Always look forward to the next !!!

    Thank you

    Frank

  2. John,

    Agreement that key-man insurance policies should be separate from buy/sell – ownership agreements. Having lived through the unexpected loss of two employees, I would encourage small businesses to look beyond ownership when considering key man insurance as part of their disaster planning process.

    Brad

  3. Mike says:

    Another type insurance to consider is whole life purchased using Section 79 Insurance.
    Allows the company to pay for the insurance ( deduction to the company) owner pays tax on only part of cost, however beneficiary is the stock holders estate ( or wife) .
    Company pays for policy , stockholder owns and benefits from it directly.
    Can tied funding this to some part of stock valve in the future.

  4. RICH FREELAND CBC says:

    John- My 43 years in the life business has taken me into many areas of practice. The usual KEY MAN POLICY is usually designed for one purpose only.It is to cover the loss of a “Key Man” such as a top salesman that brings in more than 50% of the companies business or an engineer or project manager that a company could not operate or complete a job if they should die. Buy and Sell agreements are usually to cover owners , partnerships or corporations for death or long term disabilities to owners or stock share holders to keep the business from imploding or having to deal with non producing spouses or minor corporate owners.All these plans should be drawn up by a law firm that is experienced in Business Law! not Legal zoom! The last thing is making sure that the agreements are funded with the proper products to meet the contracts specifications in the B&S agreement. I would shy away from Sec 79 plans in funding these agreements and look at the latest IRS rulings on SEC 79 use in business insurance? Comments Welcome! RICH FREELAND CBC

    • John F. Dini says:

      Thanks Richard. I agree that key man policies should be used for critical employees as well. I know dozens of companies, however, where key man covers the owner, who does not function in a sales or client management role, and the owners’ belief is that the benefit will be used to purchase stock from their families. As to the applicable IRS codes, you illustrate my point that such instruments must be carefully constructed by a professional such as you.

  5. Todd Marquardt says:

    A key man insurance policy is different from a buy sell insurance policy. You hit the nail on the head. The purposes are different.

  6. Thomas says:

    The trick is to get the business owner to planning table. In my 34 years of selling life insurance and disability insurance there is a significant resistance by small business owners to approach the topic. The vast majority of small business owners do not have these plans in place. It is even more critical for family businesses. I completed a large plan for a family business in 2004, the business was started in 1946. Good luck to all the life insurance purveyors out there. It’s a mine field.

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2014 Outlook: Are We There Yet?

“The only thing we have to fear is fear itself.” Franklin Roosevelt’s inaugural address on March 4, 1933 was an early recognition of the power of consumer confidence in bolstering our economy. In 1933 The US GDP was falling to about … Continue reading

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When Independence isn’t Freedom

I owe the idea for this column to my friend Tom Morton, whose Harrowgate blog  lends a considerable dose of dry Brit humor and keen business perspective to the issues of small business ownership. Give him a read. Sometimes the … Continue reading

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One Response to When Independence isn’t Freedom

  1. Doug Roof says:

    Great job of weaving together some of the most important and interesting facts regarding the birth of the United States of America. Commentaries like this are what make each 4th of July particularly meaningful for me. Also a reminder that no great undertaking begins perfectly, that virtually every success requires a little luck, and that any institution or process can stray from orignial intent if not closely monitored and reviewed over time.

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What are We Afraid Of?

Last weekend I took my sons to see “Battle for LA.” It’s a WWII infantry movie. All the great lines. “Go on without me.” “Mickey can hot wire that; he’s from Jersey.” “Your father was a very brave man.” Nowadays … Continue reading

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The Long Road Ahead

I’m sitting in Denver International Airport after yet another conference. Fortunately, it’s a whole 9 days until I have to come back here for another one. In January of 2009 I wrote a blog on the strategic Triple Threat. The … Continue reading

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