As you may have heard, last month the Supreme Court upheld the 8 thCircuit Court’s Connelly ruling, dramatically changing the estate tax landscape of buy/sell agreements. Entity redemptions and wait and see buy/sell agreements in most cases will no longer enjoy the exclusion of insurance policy proceeds for business valuation purposes, resulting in a potentially dramatic increase in estate taxes for such arrangements. Given the prevalence of these agreements, especially with more than 2 owners, this is an important topic to share with clients who may be subject to estate taxes. For smaller businesses it’s perhaps less time sensitive, but the potential expiration of the TCJA could expose more to these taxes in 2026. What to do? For businesses with two or (maybe) three owners, a cross-purchase could be a simple alternative. However, converting existing agreements and moving policies should be completed carefully to avoid transfer for value issues that could void some of the tax benefits of the life policies. For larger businesses and more owners, insurance LLC’s (called by many marketing names) could be a viable alternative. Such arrangements, properly structured, can reduce number of outstanding policies, receive cross-purchase tax treatment and potentially include retirement benefits if that is also a goal. A sophisticated team, armed with ideas that include split dollar and NQDC could help address multiple goals for business owners so the LLC could combine wealth creation with wealth protection. We will be hosting a 30 minute webinar on July 10th at 12 PM ET where we will have M Financial's Vice President of Advanced Planning, Bob Finnegan, J.D., CLU, AEP joining us.
If you would like to join us, please sign up here:
https://www.eventbrite.com/e/upcoming-webinar-scotus-connelly-decision-tickets-938958569357Or join the meeting directly: https://raymondjames.zoom.us/j/99783427935 | 
