Cross-Purchase Buy-Sell Agreement

A well-developed cross-buy-back contract, funded by life insurance, has the following benefits. In most situations where there are few partners who are roughly similar to age, a cross-purchase contract may be ideal. If there are several partners who need to take out compulsory insurance, the contract could become cumbersome. On the other hand, the implementation of the agreement could be complex and costly if there are many partners of different ages and public health. There are some drawbacks to these agreements. Participants should be confident and ensure that each partner maintains their insurance policy in effect. It is not as simple as making sure premiums are paid. As a general rule, the policies are personal, not by the company. When a partner goes bankrupt, federal or national exemptions cannot protect the full current value from creditors. Sometimes a participant mistakenly buys insurance on their own life and makes other participants beneficiaries; under these conditions, the payment of insurance resulting from his death is probably taxed.

If a partner retires, this event can also trigger a cross-buy sales contract. These agreements may have a fixed price for the purchase of an outgoing partner. This amount needs to be updated regularly. In other circumstances, the amount of the buyback can be calculated by an independent expert or with an evaluation formula. The third major trigger for a cross-purchase contract is a partner`s retirement, while broader agreements contain a partner`s divorce clauses (to develop the legal language of the ex-spouse) or personal bankruptcy situations. Some cross-purchase agreements have a predetermined purchase price that needs to be updated regularly, while others use an evaluation formula or require the hiring of an independent expert. If you have any questions about buy-buy cross plans, please call MEG Financial today at (877) 583-3955. A licensed insurance agent can personally check your circumstances and help you discover potential options for your business.