Arrowsmlft.gif (338 bytes)Previous Table of Contents NextArrowsmrt.gif (337 bytes)

12
Business Uses of Life Insurance
Ted Kurlowicz and John J. McFadden

Chapter Outline

LIFE INSURANCE IN EMPLOYEE BENEFIT PLANNING
GROUP TERM LIFE INSURANCE (SEC. 79) PLANS
Requirements under Sec. 79
Nondiscrimination Rules Applicable to Sec. 79 Plans
Postretirement Coverage
EXECUTIVE BONUS (SEC. 162) LIFE INSURANCE PLANS
Coordination of the Sec. 162 Plan with the Corporation�s Group Term Life Insurance Plan�the Group Term Carve-out
Reporting and Disclosure Requirements
Estate and Gift Tax Planning Considerations
SPLIT-DOLLAR LIFE INSURANCE PLANS
Basic Concepts
Traditional Split-Dollar Plans
Equity Split-Dollar Plans
Reverse Split-Dollar Plans
Split Dollar as an Executive Carve-out
Estate Tax Considerations of Split Dollar
LIFE INSURANCE IN DEFERRED-COMPENSATION PLANS
LIFE INSURANCE IN QUALIFIED PLANS, IRAs, AND 403(B) PLANS
Taxation of Beneficiaries
Fully Insured Pension Plans
Coordination of Death Benefits
Survivorship Benefits
Designing Incidental Death Benefits
Other Plans
LIFE INSURANCE IN NONQUALIFIED DEFERRED-COMPENSATION PLANS
Advantages of Nonqualified Plans
Requirements for Income Tax Deferral in Nonqualified Deferred-Compensation Plans
Financing the Employer�s Obligation in Nonqualified Deferred-Compensation Plan with Life Insurance
KEY PERSON PROTECTION
Valuing the Key Employee
Key Employee Life Insurance
FUNDING BUY-SELL AGREEMENTS WITH LIFE INSURANCE
Benefits of the Buy-Sell Agreement
Basic Structure of a Buy-Sell Agreement
Sole Proprietorship Continuation Agreements
Buy-Sell Agreements for Partnerships
Corporate Buy-Sell Agreements
Tax Implications of Corporate-Owned Life Insurance (COLI)
Buy-Sell Agreements for S Corporations

Designing the appropriate compensation package for the owners and employees of a business is a critical step in the business planning process. In small closely held businesses, the business owner�s needs will often dictate both the size and form of compensation provided to the employees. In addition, nonowner key employees of closely held businesses must be compensated appropriately or the businesses could lose their services to competitors. Finally, larger publicly held corporations must compete for the services of valued executives, and employee benefit packages represent a significant portion of the total compensation expense.

Arrowsmlft.gif (338 bytes)Previous TopArrowsm.gif (337 bytes) NextArrowsmrt.gif (337 bytes)