Using FTDs In Buy-Sell Plans

, By Brian K. Titus, second vice president, Advanced Planning Group, The Phoenix Companies, Inc., Hart

By Brian K. Titus, second vice president, Advanced Planning Group, The Phoenix Companies, Inc., Hart

Smart business owners plan for the orderly disposition and transfer of their interests in their companies in the event of their death, disability or retirement. Whether the business is a corporation, partnership or a limited liability company (LLC), a buy-sell agreement is usually the centerpiece of this planning, particularly when past and future owners are unrelated. Some form of permanent life insurance is usually needed to fund the agreement for a number of reasons, including the need for coverage for an extended period of time, perhaps right up to the death of one of the owners; business owners also often need supplemental retirement income and liquidity for estate-planning purposes.

In most cases, individual life insurance policies on each owner are purchased to fund the buy-out plan. But another type of life insurance — first-to-die (FTD) insurance — also can be used.

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