Connelly v. United States, decided unanimously on June 6, 2024, ruled that company-owned life insurance proceeds count toward a deceased shareholder's estate—adding $889,914 in federal estate tax for one Missouri family. This guide explains why redemption-funded buy-sell agreements now backfire and walks through five workable alternatives, including cross-purchase structures, insurance LLCs, and ILITs.
Key person life insurance pays the company, not the family, when a founder, rainmaker, or specialist dies. IRC Section 101(j) makes the death benefit taxable unless written notice and consent are completed before the policy issues — a step most small businesses skip, turning a $1M tax-free benefit into roughly $600K–$700K after tax.
A working-age self-employed professional is roughly three times more likely to become disabled than to die before 65, yet most carry no disability coverage. This guide explains the four policy types, the clauses (own-occupation, elimination period, benefit period) that decide whether claims pay, 2026 premium ranges of 1–4% of income, and the after-tax-vs-deductible premium choice that can shift net benefits by six figures.
Learn how to create a business succession plan that protects your legacy. Covers the five main succession options, buy-sell agreements, business valuation, tax planning, and a step-by-step timeline for small business owners.
