trusteed cross purchase buy sell agreement - Financial Planners, Articles and Q&A

Trusteed Cross-Purchase Buy-Sell Agreement

A trusted cross-purchase buy-sell agreement is a way to simplify the transaction of business shares or businesses as a whole. It also is a way to reduce taxation during these transactions. Such an agreement occurs when two business owners create life insurance policies on the other. Each has full control of the policy. When one of the owners dies, the profit from the life insurance policy is used to buy out the deceased owners' stake in their company. To simplify the process, a trustee can be involved. The trustee would be the owner of the insurance policies and benefactor of the deceased's assets. The transactions can be safely monitored by the unaffiliated trustee.

Fast Facts

There is no tax involved because there is no company finances being transferred. Only that of the insurance policies.
Trustees also help to the accuracy of the process to avoid incorrect transfers that may result in higher taxation.

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