An affordable, tax-efficient, and often overlooked financial strategy

PASS Plus - A PASS Plus arrangement involves the creation of a partnership between you, your co-owners (if any), and your business for the purpose of owning life insurance on you and the other partners.

Basically, you (and any co-owners) purchase life insurance policies and transfer them to the partnership; your business transfers cash to the partnership, which is used to pay the policy premiums.

At the death of an owner, the partnership is dissolved; the business recovers its costs; and the balance of the proceeds is paid to the deceased owner's estate, income tax free.

If an owner is disabled or retires, the partnership is dissolved; the business is repaid its cash contributions; and the policy is transferred to the disabled/retired owner who can, in turn, access its cash values via income tax free loans. (Note: policy loans will reduce the amount of the death benefit)

Section 79 Plans - If your business is set up as a "C" corporation, the IRS allows you to provide your employees with "group term life insurance" using individual cash value policies. Premiums paid by your company are tax deductible and participating employees will be taxed on the value of any insurance protection in excess of $50,000 as well as all "permanent benefits" provided by the plan.

A large portion of the premiums will be considered income taxable to the participants, but because they own their own policies, they retain access to cash values via income tax free loans, and they can name their own beneficiary for the policy proceeds. (Note: policy loans will reduce the amount of the death benefit)

Section 419 Plans - The potential benefits of a "419 Plan" are many, and include life insurance, disability protection, severance pay, medical benefits, long term care, or illness and accident benefits.

Premiums paid by your company are income tax deductible and are not considered taxable as income to the employees. Death benefits are paid income tax free and, in certain cases ("multi employer plans"), there are no stated limits on contributions. (Note: Because of the significant tax advantages and benefits of these plans, they are receiving increased IRS scrutiny.)

As a financial strategy, life insurance is often overlooked and sometimes even avoided. But in the right circumstances, it can be a tax efficient and affordable way to address the challenges you face in building and maintaining a successful business or practice.

Whether it's protecting your family, attracting and rewarding key employees, assuring business succession, or maintaining your business' good credit rating, today's life insurance contracts are worth a second look.