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BUSINESS CONTINUATION PLAN -
ENTITY 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 a business interest into cash for
heirs
- Prevents delay in the estate settlement process
- Provides money to fund the plan
- Helps fix the value of the business interest
in the estate
| Entity Arrangement |
Advantages
- Uses potentially lower tax bracket in corporation
to pay non-deductible premiums
- Requires only one policy per insured
- Uses business funds to pay premiums
- Cash values of policies are available to
the business as needed
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Disadvantages
- Control of the business may shift undesirably
after an owener death
- The basis of the surviving owner's interest
is not increased.
- The redemption of stock may be treated as
a taxable dividend if the stockholders are
family members
- The Corporate Alternative Minimum Tax may
apply on death proceeds for large Corp.
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CONCEPTS INDEX |
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