A Buy-Sell Innovation

, By Lawrence L. Bell

Here's a strategy that improves upon traditional agreements

By Lawrence L. Bell

Traditional buy-sell agreements can't always solve all problems dealing with death, retirement, withdrawal and disability without creating difficulties with income tax, estate tax, step-up in basis, alternate minimum tax (AMT) and transfer for value — to name a few.

So here's a strategy suggestion: With an eye to the final regulations for split dollar, best practices from corporate owned life insurance (COLI) and technical advice memorandums (TAMs) issued in 1996, 2000 and 2005, endorse a life insurance death benefit to other shareholders or a trusteed cross-purchase arrangement so that each shareholder is allowed to own his insurance policy, properly fund a buy-sell agreement with life insurance, and use corporate dollars to pay the majority of the costs.

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