Whether your practice is just emerging, flourishing or maturing, your
business and personal financial needs are unique. Because you have worked
hard to develop and improve your business, you will want to protect your
investment.
How much do you know about plans that can protect your practice?
Take our quiz to find out.
Match the business planning technique that's best for each
scenario described.
Scenario 1:
Planning for changes in ownership
Answers:
A
Buy-Sell Agreement
— Funded by life insurance, this is the most common
business continuation planning tool. Life insurance funds
the agreement, which establishes the value of your business
and assures a ready market for your share in the business
after you are gone.
B
Key Employee Life
Insurance — Provides important funding when you
lose a key employee.
C
Personal Estate Planning
— Helps preserve the full value of your business
upon your death.
1.
A&D Manufacturing is concerned about losing Allan,
one of their key employees. Since Allan is responsible
for generating over 50 percent of the company's sales,
if Allan died before retirement, the company would need
funds to cover the loss in sales and give them time
to find another producer.
2.
Sam owns a small business with two partners. He wants
to make sure that his family gets a fair price for his
share of the business when he dies. He also wants his
partners to be able to own the business exclusively,
without the risk of adding new owners.
3.
Susan wants a plan that will help cover her estate
taxes and liquidity needs upon her death so her business
can be preserved for her family and her employees.
Scenario 2:
Using business dollars for personal benefits
Answers:
A
Split-Dollar Life
Insurance — Your company can help pay the premium
for your own life insurance or for a key employee's life
insurance.
B
Disability Insurance
— Covers a portion of your salary when you are unable
to work.
C
Stock 303 Redemption
— Your business redeems stock from your estate to
get cash to meet your estate's obligations.
1.
Jennifer wants personal coverage in case she becomes
unable to work due to illness or injury. She would like
the benefit to be tax-deductible for her business and
paid by her company.
2.
Tim's stock is worth more than 35 percent of his adjusted
gross estate. He wants to find a program to help pay
his estate taxes and settlement costs upon his death.
3.
Jill wants help paying for her own life insurance
coverage. She would like her company to help "advance"
money to pay the annual premium. She is also interested
in offering this benefit to select key employees.
Scenario 3:
Employee benefits to increase income and improve key employee
retention
Answers:
A
Disability
Salary Continuation Planning — Helps protect
you, your employees and your business from the financial
consequences of a disability.
B
Qualified
Pension and Profit-sharing Plans — Employee-sponsored
retirement programs.
C
Golden
Executive Bonus Arrangement (GEBA) — Life
insurance for select employees.
D
Financial Strategies — Helps employees manage
their money more effectively to meet their financial goals.
E
Group
Insurance — Can include medical, disability
and life insurance programs.
F
Split-Dollar
Life Insurance — Provides life insurance to
select executives at a reduced cost.
1.
Kelly wants to offer a special service to her employees
to help them effectively prepare for their financial
future.
2.
Andy wants to make sure that his business is well-protected
in the event one of his employees is disabled. He also
wants a plan that is tax-deductible for his business.
He is considering funding a plan with disability insurance
policies.
3.
Jeff knows the importance of providing valuable benefits
to help retain his employees. He wants to offer a variety
of programs that provide tax deductions generated by
the premiums he pays to keep the costs low.
4.
Christine wants to allow her employees
to take advantage of special tax breaks with their retirement
program. She also wants the option of making tax-deductible
contributions to the plan.
5.
John wants to provide a special bonus plan
that provides life insurance for some of his top employees
and gives his business a current income tax deduction.
6.
Julie wants to offer Mike, one of her key
executives, the opportunity to purchase life insurance
at a reduced cost.
How
Key Person Life Insurance works:
The employer pays the premiums for a life insurance policy
on the key employee's life.
The employer is the owner and the beneficiary.
The employer can arrange an Exchange of Insurance Agreement
in the event a key employee leaves prior to retirement.
This allows the employer to transfer coverage to a successor.
If a key employee dies, the employer receives the policy's
income tax-free death benefit and can apply it towards business
expenses or losses caused by the employee's death.
Learn more about
how 
