Aware Financial, LLC.  
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Business Buy/Sell Arrangements

While nearly all businesses have buy/sell provisions in their operating documents, funding is often ignored or improperly structured. In a buy/sell situation, it is very easy to run afoul of the transfer for value rule of Internal Revenue Code Sec. 101 making the entire life insurance death benefit taxable. This very costly mistake can happen many different ways. Other concerns are whether the insurance amount has kept up with the growth in the value of the business and whether the policy is performing adequately.

A business continuation evaluation involves:

1. Reviewing the buy/sell agreement,

2. Verifying that policy ownership and beneficiary designations match the agreement and provide maximum tax efficiency,

3. Synchronizing the current value of the business with the amount of insurance, and

4. Analyzing the insurance policies for performance, pricing and company strength.


1. Can avoid very large tax costs.

2. Can ensure a tax basis step-up for surviving owners.

3. Identifies situations where insurance amount is inadequate.

4. Provides maximum value for premium dollars.


There is no downside to reevaluating buy/sell funding other than the small amount of time it takes to gather the documents and review the results.

"A BUY/SELL that is not funded won't solve the problem."