The Life Cycle Buy Sell Agreement
The Life Cycle Buy Sell is a relatively new method for structuring a Buy Sell Agreement. Under traditional methods, owners must choose between company owned life insurance or cross-owned life insurance. Both of these methods have their advantages and disadvantages. The Life Cycle Buy Sell attempts to provide the advantages of both of these methods.
| Description | Company Owned
Life Insurance |
Cross-Owned Life Insurance | Life Cycle Buy Sell |
| Step-Up in Tax Basis for Surviving Owners | No | Yes | Yes |
| Only One Policy Needed Per Owner | Yes | No | Yes |
| Custom Allocation of Costs and Benefits | No | No | Yes |
| Tax-Free Access to One’s Own Cash Values* | No | No | Yes |
| Cash Values Protected from Company Creditors | No | Yes | Yes |
| Cash Values Protected from Individual Creditors | Yes | No | Yes |
| Retiring Owners Can Take Policy Without Triggering Transfer-For-Value Tax | No | No | Yes |
| Avoid C-Corp. AMT Taxes on Death Benefit | No | Yes | Yes |
* Distributions are Tax-Free to Extent of Premiums Paid, then Tax-Free Policy Loans
– This page presents summary information and should not be taken as legal advice for any particular situation. Clients should seek legal counsel pertaining to their individual situation.
by Lee S. McCullough, III