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A Business Life Insurance and Estate Planning Guide


Business owners don’t plan to fail… Often, they simply fail to plan.

SMALL BUSINESS OWNER PLAN FOR SUCCESS The Small Business Administration has found that 70% of the country’s small businesses have no succession plan and fewer than 30% pass successfully from one generation to the next.

30% Have A Plan

70% Have No Plan

SOURCE: New York Times “Keeping the Family Happy”, May 1, 2006.


Managing Risk Even if your business is profitable, there are potential risks that could negatively impact your business. A sound plan for protecting your business interest should include:

• Protecting and preserving assets • Removing or reducing uncertainty • Providing financial security

Team Members Protecting your business is a big job and fortunately you’re not alone. A team of professionals can help you achieve your goals.

Your team: Your Accountant Assists in the preparation of tax returns, risk assessments and other financial transactions. The services of a qualified accountant are instrumental in business and estate valuation.

Your Attorney Provides legal counsel, and can help you assess your business insurance needs. An attorney is responsible for preparing the necessary paperwork for solving estate planning problems.

Your American General Life and Accident Insurance Company (AGLA) representative Provides life insurance products necessary to solve your business continuation, employee retention, and estate planning needs.


Business Continuation The unexpected loss of a key employee or business owner can cause economic uncertainty and jeopardize the profitable continuation of your business.


Key Person Life Insurance Protects your business against the financial loss that may occur at the untimely death of an individual whose expertise is vital to the success of your business. Your business is the owner, beneficiary, and payer of the life insurance policy.

Buy-Sell Agreement Establishes the sales price of your business, obligates the buyer to buy and the seller to sell the business in advance. Protects the value of your business and provides for an orderly continuation of the business at the owner’s death, disability or retirement.


National Federation of Independent Business: as of July 2008

Life Insurance as Credit Protection Cash value life insurance owned by a business can be pledged as collateral should the business need to obtain a loan. In addition, should an emergency strike, the business can access the accumulated cash value through loans and/or withdrawals.

Employee Bonus and Retention Plans Your business is a valuable asset that needs to be protected. It is a source of income for you and your family, as well as for your employees.

Executive Bonus I.R.C. Section 162 Your business pays a bonus to a key employee or business owner* that is used to purchase life insurance.

Split-Dollar Insurance Your business and a key employee share the cost and benefits of a life insurance policy.

Non-Qualified Deferred Compensation Your business utilizes cash value life insurance to fund an agreement providing specified benefits payable at a future event, such as retirement, death or disability of a key employee.

“Take away my factories, my plants; take away my railroads, my ships, my transportation; take away my money; strip me of all of these, but leave me my people, and in two or three years I will have them all again.� -Attributed to Andrew Carnegie

* If used for a business owner, the company would need to be a C-Corp to take advantage of the tax deductibility of the bonus paid.

This guide provides information on some common business insurance concepts. The information is general in nature and is not intended to be legal or tax advice. You should consult your attorney and tax advisor in regard to your specific situation.


Estate Planning Estate taxes and other costs can significantly reduce the amount of your estate you are able to pass on to your heirs.

Wills An essential part of every estate plan. It determines, in writing, to whom and in what manner your property will be distributed after your death. State law determines how your estate is handled if you do not have a will.

Trust Arrangements Probate fees and estate taxes can be reduced or avoided by the use of one or more properly established trusts. Also, life insurance owned by a trust can provide funds to pay your estate settlement costs.1

A 2007 survey of family owned businesses found that many haven’t prepared for succession or efficient transfer of their wealth. Fewer than half of these business owners, who expect to retire within five years, had selected a successor, and nearly a third has done no estate planning beyond a will. SOURCE: Wall Street Journal “Whose Business Will This Be?” March 17, 2008



67% Don’t

National Federation of Independent Business: July 2008

Estate Equalization Life insurance can be used to provide equal shares of your estate to your children. By naming the children who are not involved in your business as beneficiaries at an amount equal to the value of the business you intend to leave to your children who will inherit the business, you have “equalized” the value of your business included in your total estate.

Charitable Gifts By giving money or property to a charity, you can reduce the size of your estate. Charitable gifts may also be income tax deductible.

Are you prepared?

Would your business financially survive... • If a key person who contributes substantially to the profitability of your business dies prematurely? • If you were forced to become business partners with your deceased partners heirs who either don’t understand the business or are not interested in the businesses affairs? • If a vital employee left you for a competitor? • If you and your spouse co-owned a business and your marriage ended in divorce?

Take Action: Prepare for your Future

This guide provides information on some common business insurance concepts. The information is general in nature and is not intended to be legal or tax advice. You should consult your attorney and tax advisor in regard to your specific situation.

Begin today by speaking with your AGLA representative about how life insurance can be used to protect your business and help plan for your estate.


“We are changing the way Main Street small business owners think about, purchase and use life insurance.”

Affordable, innovative life insurance you don’t have to die to use.

American General Life and Accident Insurance Company American General Center, Nashville, TN 37250 The underwriting risks, financial and contractual obligations and support functions associated with products issued by American General Life and Accident Insurance Company (AGLA) are its responsibility. AGLA does not solicit business in the states of New York and Wyoming. Many of the concepts discussed in this guide involve life insurance products available through American General Life and Accident. Your AGLA representative will work with you and your professional advisors to help you determine the right policy and the appropriate amount of coverage for your specific situation. 1

Estate Exemption/Gift Exemption: In 2009, the federal estate tax exclusion is $3,500,000. There are no estate taxes due in the year 2010, however in 2011, due to the sunset provision of EGTRAA 2001, the exclusion returns to $1,000,000 unless Congress acts.

AGLA2204 (0309) 1

© 2009 All rights reserved.

Strategies for Protecting Your Business  

A Business Life Insurance Planning Guide. "We are changing the way Main Street small business owners think about, purchase, and use life in...

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