Strategies for Protecting Your Business


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  • For additional information on American General Life & Accidient, Nashville, TN (aka....AGLA), feel free to call Agents Ins. Sales & Service (aka...AIS). We are one of AGLA's largest IMO (Ind. Marketing Organizations). You can call or email Ken Kaufman, National Sales Director of the Living Benefits Division (for AIS) at 623-9077-3411 or email Ken at
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Strategies for Protecting Your Business

  1. 1. A Business Life Insurance and Estate Planning Guide 1
  2. 2. Business owners don’t plan to fail… Often, they simply fail to plan. SMALL BUSINESS OWNER PLAN FOR SUCCESS Managing Risk Even if your business is profitable, there are The Small Business Administration has found that 70% of the country’s small businesses have potential risks that could negatively impact your no succession plan and fewer than 30% pass business. successfully from one generation to the next. A sound plan for protecting your business interest should include: 70% 30% Have • Protecting and preserving assets Have A No Plan Plan • Removing or reducing uncertainty • Providing financial security SOURCE: New York Times “Keeping the Family Happy”, May 1, 2006. 1
  3. 3. Team Members Protecting your business is a big job and fortunately you’re not alone. A team of professionals can help you achieve your goals. Your team: Your American General Your Accountant Life and Accident Assists in the preparation of tax returns, risk Insurance Company assessments and other financial transactions. The services of a qualified accountant are (AGLA) representative instrumental in business and estate valuation. Provides life insurance products necessary to solve your business Your Attorney continuation, employee retention, Provides legal counsel, and can help you assess and estate planning needs. your business insurance needs. An attorney is responsible for preparing the necessary paperwork for solving estate planning problems. 2
  4. 4. Business Continuation The unexpected loss of a key employee or business owner can cause economic uncertainty and jeopardize the profitable continuation of your business. SMALL BUSINESS OWNERS KNOWLEDGEABLE ABOUT BUSINESS LIFE INSURANCE 11% Yes 89% No National Federation of Independent Business: as of July 2008 Key Person Life Insurance Protects your business against the financial loss that may occur at the untimely death of an individual whose expertise is vital to the success of your business. Your business is the Life Insurance as Credit owner, beneficiary, and payer of the life insurance policy. Protection Cash value life insurance owned by a business can be pledged as collateral Buy-Sell Agreement should the business need to obtain a Establishes the sales price of your business, loan. In addition, should an emergency obligates the buyer to buy and the seller to sell strike, the business can access the the business in advance. Protects the value of your business and provides for an orderly accumulated cash value through loans continuation of the business at the owner’s and/or withdrawals. death, disability or retirement. 3
  5. 5. Employee Bonus and Retention Plans Your business is a valuable asset that needs to be protected. It is a source of income for you and your family, as well as for your employees. Executive Bonus I.R.C. Section 162 Your business pays a bonus to a key employee or business owner* that is used to purchase life insurance. Split-Dollar Insurance Your business and a key employee share the cost and benefits of a life insurance policy. Non-Qualified Deferred Compensation “Take away my factories, my plants; take away my railroads, my ships, my Your business utilizes cash value life insurance to fund an agreement providing transportation; take away my money; specified benefits payable at a future event, strip me of all of these, but leave me such as retirement, death or disability of a my people, and in two or three years key employee. I will have them all again.” -Attributed to Andrew Carnegie * If used for a business owner, the company would need to be a C-Corp to take advantage of the tax deductibility of the bonus paid. This guide provides information on some common business insurance concepts. The information is general in nature and is not intended to be legal or tax advice. You should consult your attorney and tax advisor in regard to your specific situation. 4
  6. 6. Estate Planning Estate taxes and other costs can significantly reduce the amount of your estate you are able to pass on to your heirs. Wills FEW SMALL BUSINESS OWNERS CARRY EXTRA LIFE INSURANCE ON THEMSELVES An essential part of every estate plan. It determines, in writing, to whom and in what 33% manner your property will be distributed after Do 67% your death. State law determines how your Don’t estate is handled if you do not have a will. Trust Arrangements National Federation of Independent Business: July 2008 Probate fees and estate taxes can be reduced or avoided by the use of one or more properly established trusts. Also, life insurance owned by a trust can provide funds to pay your estate Estate Equalization settlement costs.1 Life insurance can be used to provide equal shares of your estate to your children. By naming the children who are not involved in your business as beneficiaries at an amount equal to A 2007 survey of family owned the value of the business you intend to leave to businesses found that many haven’t your children who will inherit the business, you have “equalized” the value of your business prepared for succession or efficient included in your total estate. transfer of their wealth. Fewer than half of these business owners, who expect to retire within five years, had selected Charitable Gifts a successor, and nearly a third has By giving money or property to a charity, you done no estate planning beyond a will. can reduce the size of your estate. Charitable SOURCE: Wall Street Journal “Whose Business Will This Be?” gifts may also be income tax deductible. March 17, 2008 5
  7. 7. Are you prepared? Would your business financially survive... • If a key person who contributes substantially to the profitability of your business dies prematurely? • If you were forced to become business partners with your deceased partners heirs who either don’t understand the business or are not interested in the businesses affairs? • If a vital employee left you for a competitor? • If you and your spouse co-owned a business and your marriage ended in divorce? Take Action: Prepare for your Future Begin today by speaking with your AGLA representative about how life insurance can be used to protect your business and help plan for your estate. This guide provides information on some common business insurance concepts. The information is general in nature and is not intended to be legal or tax advice. You should consult your attorney and tax advisor in regard to your specific situation. 6
  8. 8. “We are changing the way Main Street small business owners think about, purchase and use life insurance.” Affordable, innovative life insurance you don’t have to die to use. American General Life and Accident Insurance Company American General Center, Nashville, TN 37250 The underwriting risks, financial and contractual obligations and support functions associated with products issued by American General Life and Accident Insurance Company (AGLA) are its responsibility. AGLA does not solicit business in the states of New York and Wyoming. Many of the concepts discussed in this guide involve life insurance products available through American General Life and Accident. Your AGLA representative will work with you and your professional advisors to help you determine the right policy and the appropriate amount of coverage for your specific situation. 1 Estate Exemption/Gift Exemption: In 2009, the federal estate tax exclusion is $3,500,000. There are no estate taxes due in the year 2010, however in 2011, due to the sunset provision of EGTRAA 2001, the exclusion returns to $1,000,000 unless Congress acts. AGLA2204 (0309) © 2009 All rights reserved. 1