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Business Revenue Risk Protection and Personal Savings all in one!

Wealth Strategy: Shared Ownership

Your situation:

Your business has grown. It now supports your family and multiple employees. Even with the other workers, you are still key to the success of the company and are concerned about what will happen to revenue if you are no longer able to contribute your skills and knowledge due to your pre-mature death. You’re also concerned about putting enough money aside for income needs down the road. With much of your money wrapped up in your company, you wonder how you can access it for personal use without paying high taxes.

Your need:

  1. Business revenue risk protection
  2. Tax efficient use of surplus corporate dollars
  3. Personal savings boost
  4. Future income strategy

Your Strategy:

The most cost-effective way to obtain business revenue risk protection is with insurance. By purchasing a permanent life insurance policy, you can save money on a tax deferred basis to be used for future income needs. With the Shared Ownership Wealth Strategy, you can transfer corporate dollars, effectively and efficiently, to be used by you personally. Here’s how it works:

Purchase a permanent life insurance policy. Once the policy is issued, enter into a Shared Ownership agreement with your company. In this agreement, the company pays for and owns the death benefit while you own the savings portion of the policy. This ensures the financial security of the business (in the case of your pre-mature death) and, in exchange, it pays a portion of the premiums. At a predetermined date, the agreement expires and ownership of the death benefit reverts back to you, the original owner. As a result, you have a cash rich insurance policy throughout your lifetime and both you and your company have insurance protection when needed most.

The Shared Ownership Wealth Strategy provides many benefits including:

  • Previously ‘trapped’ corporate surplus dollars are moved to the insurance policy as premium payments. This eliminates the tax, otherwise generated by the surplus earnings, and creates a tax deferred investment vehicle for you.
  • The policy’s accumulated cash value can be used for future income needs.
  • In the event of your death during the Shared Ownership agreement period, your business will receive a tax-free insurance benefit allowing your successor time to make decisions regarding the company’s future.
  • After the Shared Ownership agreement expires, the ownership of the insurance policy reverts back to you with the tax-free death benefit forming part of your estate planning strategy.

The Shared Ownership Wealth Strategy is just one of several wealth strategies that may work for your particular situation.

Let’s start a conversation.

Contributed by David L. Bumstead, CFP, CLU, CH.F.C, CHS, TEP

This article is provided for information purposes only. Although the content is believed to be reliable when posted, p|w|m Advisory Group cannot guarantee this information is current, accurate or complete and does not assume any liability. The information is not intended to provide any insurance, financial, legal, accounting or taxation advice and should not under any circumstances be relied upon without consultation about your specific situation. The information is subject to modification and updating from time to time without notice.


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