The Role of Life Insurance in Estate Taxes The recent U.S. Supreme Court case, United States v. Connelly, provides business valuation practitioners opportunities to a cautionary tale and also an opportunity to assist business owners structure or restructure their buy-sell agreements. The authors summarize the case and offer tips to assist business owners transition a business using life insurance. Introduction Does the fair market value standard require the insurance proceeds owed to a company at the date of a shareholder’s death need to be added to the value of the business for tax purposes? The Supreme Court ruled that, yes,…
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Connelly v. United States—Do Redemption Agreements Create a Business Liability? Most have some form of agreement and financing in place to address sudden changes in ownership. In Connelly v. United States, a unanimous U.S. Supreme Court may have turned many of those plans on their heads. The question before the Court was whether a redemption agreement created a liability to the company. The author discusses the decision and impact it may have on succession planning. One of the great challenges for privately held businesses is dealing with the unexpected departure of an owner, whether by disability or death. Most have…