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Buy – Sell Agreements Funded By Life Insurance

There is considerable planning that goes into running a business. This is especially true if there is more than one partner involved in the business. It is important to have a clear understanding and agreement if something should happen to one of the owners. According to David N. Barkhausen, “Buy-sell agreements among co-owners or present and future owners of a closely-held business are intended to assure the smooth future transition of its ownership. They provide the mechanism, and, if properly funded, the means, to effect a change in control and a transfer of interests upon the occurrence of a number of events, beginning with death, disability and retirement.”

Here are some of the benefits of a buy-sell agreement:

Provides recovery for partners and heirs

Tax advantages

Provides for transfer of ownership and wealth

Creates fair and market value exchange of ownership

What can be a trigger for a buy-sell agreement?

Death, disability, retirement, divorce, loss of license, termination, and voluntary transfer of ownership.

How is a buy-sell agreement funded?

Any buy-sell agreement requires a decision regarding the type of insurance policy to purchase. The initial choice is between term and whole life insurance. The ability to maintain life insurance throughout a shareholder’s life is important. Of course there are other methods of funding including; cash, borrowing, and stock, but the most common is insurance.

We recommend you consult with an attorney and tax professional as part of your planning process.

Established in 1976, Lakeview Insurance Agency serves individuals, families and businesses in Illinois, Wisconsin, Indiana and Michigan. Located in Chicago’s Lakeview neighborhood, our company is led by its founder Charles (Chuck) Stewart.

An independent insurance agency, we represent more than thirty top insurance carriers.



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Lakeview Insurance Agency of Illinois, Ltd.
3438 N. Southport Ave.
Chicago, IL 60657 map
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Lakeview Insurance Agency of Illinois, Ltd.
1167 Wilmette Avenue, Ste 201
Wilmette, IL 60091 map
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