Planning For A Successor

Whether a successor is a family member, partner/shareholder, or key employee proper planning is vital to the continued success of your business now and in the future. Early planning avoids the added strain caused by re-financing to buy out a retiring owner/shareholder. Universal and Whole Life plans are ideal financial tools for this application due to there ability to shelter funds on a tax-deferred basis.

Corporate Pension Augmentation - The advantage of tax-sheltered growth within a Universal or Whole Life plan allows corporations to structure pension augmentation for executives.

By over funding the insurance requirements the cash value will accrue tax-deferred until retirement, at which time withdrawals can be made or leveraging can be implemented.

Leveraging Strategies - Cash Values from a Universal or Whole Life plan can be assigned to a bank, which in turn provides a line of credit to use for retirement income.

The advantages to these arrangements are that cash values within the plans continue to accrue without taxation. As well, individuals can access their line of credit without having to pay personal income tax. In corporate arrangements the income is taxable to the retired shareholder. However in both cases, if structured properly the interest paid on the line of credit may be tax deductible. Professional Assistance should always be sought prior to implementing any of these arrangements.

In succession planning the question of Fair vs. Equal comes up in a large number of situations. If an owner/shareholder leaves a business asset or a company to one child; what is a fair treatment for a non-participating children? Death benefits from a life insurance plan can be used to provide a fair equalization solution. The amounts can be selected by the owner/shareholder, which would alleviate the added pressure, complications and financial burden to his or her successor.