In this episode of Q&A Over Coffee, host Tom Pesch welcomes Tony Oman, Principal of Business Valuation & Transaction Advisory Services, to discuss how the recent Connelly Supreme Court ruling has changed the way life insurance is treated in business valuations.
What You’ll Learn in This Episode:
Why life insurance is often used to fund buy-sell agreements and create liquidity when a shareholder passes away.
How the Connelly case shifted IRS treatment of corporate-owned life insurance and the ripple effects on estate planning.
The risks of outdated or underfunded buy-sell agreements and why an annual review is key.
Planning strategies to address the new landscape, including:
Special purpose LLCs for holding life insurance policies
Cross-insurance between shareholders
Irrevocable life insurance trusts (ILITs)
Key Takeaway:
Every situation is unique—there’s no one-size-fits-all solution. Business owners should work closely with advisors to ensure their buy-sell agreements and succession plans are structured to avoid unintended tax consequences.