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Business continuity strategies

Strategies for a smooth transition

As a business owner, you’ve got plenty to do keeping your company up and running on a daily basis.

Preparing for what will happen to your business after you retire – or are suddenly unable to run it – can be daunting, but you don’t have to do it alone. A financial professional can help you build a succession strategy that can be key to the success and survival of the business you’ve worked so hard to build.

We’ll work with you to prepare for your eventual exit and the challenges that come with changes in ownership, as well as put a strategy in place to help make sure your business is protected from the unexpected.

Creating a strategy now will help ensure your long-term goals are met – whether that’s receiving a fair value for your company, maintaining pride in its ongoing name and tradition or smoothly transitioning ownership to an employee or family member.

Prepare for the unexpected loss of an owner

Implementing a buy-sell agreement provides clarity around the future of a business with more than one owner. It’s an arrangement where the surviving business owner(s) agree to purchase the ownership interest of a deceased business owner.

Buy-sell agreements establish the value of your business and assure a ready market for your share, should you die.

A common way to fund a buy-sell agreement is by purchasing life insurance owned by the business owners or the business itself. Some arrangements also provide living buyouts or retirement accumulations.

Cross-Purchase Buy-Sell

This variation of buy-sell, between owners of the company, uses life insurance cross-owned by the business owners.

Upon death of one owner, the surviving owners use the death benefit proceeds to purchase the deceased owner’s shares.

Entity Redemption Buy-Sell

This arrangement, between the company and the owners, uses life insurance owned by the business and the business is also named the beneficiary.

Each owner agrees to sell his or her interest to the business at death and the business agrees to buy the owner’s interest.

Upon the death of an owner, the company uses the death benefit proceeds to purchase the deceased owner’s shares.

LifeCycle Buy-Sell

The Lifecycle Buy-Sell facilitates transfer of ownership and combines the advantages of both Entity Redemption and Cross Purchase. It also offers living buyout or retirement accumulation options – making it a flexible and efficient ownership transfer vehicle.

Using this strategy, the business owners create a new business entity to own the life insurances policies on each of their lives.

Cross-Endorsed Buy-Sell

This arrangement offers the benefits of a Cross-Purchase Buy-Sell while retaining ownership of your insurance policy.

Each business owner endorses a portion of the death benefit amount to the other owner(s) charging a rental charge. The business owners recognize the rental income as income on their taxes. The policy’s death benefit fulfills the requirements of the buy-sell arrangement.

One-Way Buy-Sell

A key employee or an outsider purchases life insurance on the business owner. Following the business owner’s death, death benefit proceeds are used to purchase the deceased owner’s share.

Prepare for a successful exit

Convert your hard work into retirement income. By planning ahead, you can help maximize the benefits you receive from the sale of your business and set it up for future success.

Preparing an exit and transition strategy is important – and complicated. Our products and services can help you ensure the ongoing success of your business.

Securian Financial can help you prepare for issues that come with changes in ownership. We’ll consider what works for you and your business, including:

  • Executive compensation for potential buyers
  • Buy-sell arrangements
  • Estate and gift tax considerations
  • Consulting agreements
  • Noncompete agreements
  • Methods to transfer business goodwill and customer relationships to the new owner


Please keep in mind that the primary reason to purchase a life insurance product is the death benefit.

The life insurance death benefit is income tax free to the business if the business, at the time of purchase, had met the requirements of Internal Revenue Code Section 101(j), including providing the insured with advance notice, obtaining the insured's prior consent to be insured, and meeting insured's income requirements.

Life insurance products contain charges, such as Cost of Insurance Charge, Cash Extra Charge, and Additional Agreements Charge (which we refer to as mortality charges), and Premium Charge, Monthly Policy Charge, Policy Issue Charge, Transaction Charge, Index Segment Charge, and Surrender Charge (which we refer to as expense charges). These charges may increase over time, and these policies may contain restrictions, such as surrender periods. Policyholders could lose money in these products. 

Policy loans and withdrawals may create an adverse tax result in the event of lapse or policy surrender, and will reduce both the surrender value and death benefit. Withdrawals may be subject to taxation within the first fifteen years of the contract. You should consult your tax advisor when considering taking a policy loan or withdrawal. 

This information is a general discussion of the relevant federal tax laws provided to promote ideas that may benefit a taxpayer. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. Taxpayers should seek the advice of their own advisors regarding any tax and legal issues specific to their situation.


DOFU 2-2023