In business today, there are daily concerns about day-to-day affairs of the company and concerns about planning for the future. Often times, the business of today is so pressing that there is little time given to thinking about the long-range future of the business. But, perhaps you’ve asked yourself questions like:
- Who would take over the business if something should happen to me tomorrow?
- What would happen to the success of my business if something happened to one of my key employees?
- How can I offer special benefits to select executives without the limitations imposed on qualified plans?
Insuramerica can assist you with these questions and provide solutions with the use of Key Person Insurance, Buy/Sell Agreements funded with Life and Disability Insurance, Deferred Compensation, and Executive Bonus Arrangements.Contact us at: firstname.lastname@example.org or call 800-654-7892 and ask for the Life, Health & Financial Services Dept.
Your key employees are your most valuable business asset. Their skill, knowledge and experience are your real profit makers. Without them, the success and growth of your business could be in jeopardy. Key employee insurance is designed to protect your business from the adversities associated with the loss of a key employee, manager, or executive. The death or disability of a key employee could result in a substantial financial loss due to hiring and training a replacement, lost sales, and or slowed production.
A business can purchase key employee insurance on the life of the employee to cover the possibility of an income loss and/or increase in expenses resulting from the key employee’s death.
The death (or disability) of an owner of a closely held business is typically disruptive for the business and often leads to its failure. A properly designed and funded buy-sell agreement offers the following benefits:
- It guarantees that there will be a market for the business.
- It provides liquidity for the payment of estate taxes and other misc. costs.
- It helps establish the estate tax value of the decedent’s business interest, making estate planning easier.
- It ensures the business will continue in the hands of the surviving owners and/or employees.
- It makes the business a better credit risk because its probability of continuation is enhanced.
A buy-sell agreement is a contract binding the owner of a business interest to sell at his or her death, and a designated buyer to buy at that time, the business interest for a specified or determinable price. The agreement should specify how the purchase price will be funded.
Life insurance is an excellent vehicle to fund a buy-sell agreement!
Deferred compensation is an employer-provided, non-qualified plan maintained primarily to provide meaningful retirement benefits for top executives. Deferred compensation is a way for you to offer special benefits to select executives without the IRS and ERISA limitations imposed on qualified plans.
There are many types of deferred compensation programs. Generally, deferral implies that the compensation received later as a retirement benefit may be considered later payment for current work. Deferred compensation usually has an unsecured status. That means that the employer has control over any amount being accumulated and that amount must be regarded as a general asset of the corporation, subject to its creditors. Therefore, taxation is deferred on an employee level until such retirement income is actually received or made available. A tax-deduction to the business is available when the benefits are paid out to the employee.
The plan is generally twofold. First, an agreement exists between the employer and the employee, which stipulates the terms of the compensation and the promise of the employer to pay the future benefit. The agreement may also specify that if the executive dies before retirement, an annual benefit will be paid to the executive’s beneficiary. All the specifics are set out in a written agreement. Second, some type of mechanism such as cash value life insurance or cash depository is used to back up the arrangement.
One way to provide an extra perk for select employees or executives is through an arrangement called Executive Bonus. An Executive Bonus Plan is an employer-paid for, non-qualified plan that provides permanent life insurance for selected employees. This type of plan is very simple in operation. The employee purchases and owns a life insurance policy and names someone other than the employer as the beneficiary. The corporation pays the tax deductible premium. The cost to the employee is the income tax due on the premium paid by the business which is considered a bonus to the employee.
At the employee’s death, the beneficiary receives the death benefit income tax free.
Contact us at: email@example.com or by calling 800-654-7892 and ask for the Life, Health & Financial Service Dept.