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BUSINESS CONTINUATION PLAN -
CROSS PURCHASE ARRANGEMENT
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What it is:
- A plan that assures the continuation of a
business after the death of an owner
How it works:
Advantages:
- Provides for business survival after the
death of an owner
- Provides a plan for dealing with the company's
liabilities and financial responsibilities
- Creates a market for the business interest
- Converts non-liquid business interest into
cash for family
- Facilitates the estate settlement process
- Provides money to buy the business interest
- Helps fix the value of the business interest
in the estate
| Cross Purchase Arrangement |
Advantages
- Increased basis for survivor's interest
- Can take advantage of possible lower tax
bracket for individual
- Cash values of policies are available to
individuals for lifetime buyout
- Guarantees that control goes to desired persons
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Disadvantages
- Requires individuals pay for policies with
personal dollars (unless
split dollar is
used)
- Requires more than one policy per insured
if more than two parties
to agreement
- Differences in ages of insureds will require
a larger premium to be paid by younger parties
on policies of older sharholders
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CONCEPTS INDEX |
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