Buy-Sell Agreement Funded by PFLI
Securing Business Continuity: A PFLI-Funded Buy-Sell Agreement
Introduction
This case study highlights how Premium Financed Life Insurance (PFLI) provided a strategic solution for Mr. Thompson and Mr. Green, partners in a successful technology company. They sought a secure method to ensure business continuity and protect their families’ interests.
Key Objectives:
- To establish a fair and funded buy-sell agreement.
- To ensure business continuity and family security.
The Challenge
Both partners were concerned about the potential impact on the business if one of them passed away unexpectedly. They needed a solution that would not only provide immediate liquidity for a buyout but also preserve the business’s value and stability.
The Solution
Strategy Overview:
A PFLI-funded buy-sell agreement was structured to address these concerns. Key steps included:
- Policy Selection and Financing: Selecting and financing life insurance policies on each partner.
- Agreement Structuring: Drafting a buy-sell agreement that used the life insurance proceeds to fund the buyout.
- Integration into Business Planning: Ensuring the strategy was integrated seamlessly with their overall business plan.
The Results
The PFLI-funded buy-sell agreement significantly strengthened the business’s succession plan:
- Financial Security for Families: Provided a clear and fair method for transferring business interest, securing financial stability for the surviving family.
- Business Continuity: Ensured that the business could continue smoothly without financial strain.
- Tax Efficiency: The life insurance proceeds provided a tax-efficient method of funding the buyout.
Conclusion
The case of Mr. Thompson and Mr. Green demonstrates the effectiveness of using PFLI to fund buy-sell agreements, offering a practical solution for business continuity and family protection.
