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1 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC Important Notice The following presentation has been developed and approved for use by authorized.

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Presentation on theme: "1 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC Important Notice The following presentation has been developed and approved for use by authorized."— Presentation transcript:

1 1 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC Important Notice The following presentation has been developed and approved for use by authorized producers and agents of the insurers of American General Life Companies. This presentation must be used with the accompanying narrative notes which are included in the presentation. You must take the following steps to access these notes: 1. Save the presentation to your laptop or PC 2. Open the saved presentation; then click the View option in your menu bar in the upper left corner of your screen 3. From the View drop down, click Notes Page This will open the presentation with the narrative notes at the bottom of each slide. When making the presentation, these notes must be used without modification. Please contact your American General Life Companies representative with additional questions.

2 2 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 2 BUY-SELL AGREEMENTS July 2009 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC

3 3 3 Disclaimer The information presented herein is not a comprehensive analysis of the topic presented, and the viewer should consult tax and legal advisors to understand all the ramifications of the topics discussed. Please be advised that any information provided in this presentation SHOULD NOT be construed by any person as legal, tax or accounting advice. American General Life Companies strongly suggests that any life insurance owner, proposed owner, insured or proposed insured retain the services of qualified tax, accounting and legal counsel for advice on matters presented herein. The insurers of American General Life Companies are solely providers of insurance products. To ensure compliance with requirements imposed by U.S. Treasury Regulations, we inform you that any tax advice contained in this presentation (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

4 4 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 4 The Buy-Sell Agreement Illustrates commitment to the business Recognizes obligation to the community Creates exit strategies for business owner Establishes clarity for heirs

5 5 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 5 The Buy-Sell Agreement Provides continuity of management Establishes fair and reasonable price Converts business interest to cash Insures for triggering events Sets business value for estate tax purposes

6 6 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 6 Potential Buyers Shareholders Partners Business Key Employees Third Party Forced Sale

7 7 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 7 The Buy-Sell Agreement Entity Purchase agreement a.k.a. Stock Redemption agreement Cross Purchase agreement

8 8 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 8 Entity Purchase Agreement Entity Purchase agreement a.k.a. Stock Redemption agreement Business entity purchases outstanding shares and retires them as Treasury Stock More an option for C-Corporations Remaining owners percentages adjusted

9 9 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 9 Entity Purchase Agreement Advantages Easy to comprehend and create Simplified administration One owner/beneficiary of insurance products Single payer of insurance premiums

10 10 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 10 Entity Purchase Agreement Disadvantages Step up in ownership basis lost Alternative Minimum Tax (AMT) risks IRC Sec 101(j) compliance requirements Taxation variations

11 11 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 11 Cross Purchase Agreement Cross Purchase agreement Individuals buy outstanding interests Broader entity application Remaining owners percentages may change

12 12 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 12 Cross Purchase Agreement Cross Purchase agreement Individual Owners / Non Owners Trusteed One Way

13 13 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 13 Cross Purchase Agreement Advantages Step up in ownership basis available Alternative Minimum Tax not applicable IRC Sec 101(j) not applicable

14 14 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 14 Cross Purchase Agreement Disadvantages Difference in insurance premiums among insureds due to risk factors Potentially large number of policies (# of owners) x (# of owners – 1)

15 15 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 15 Funding An Agreement Alternatives Insurance products Sinking funds Sale of assets Installment sale

16 16 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 16 The Buy Sell Agreement Entity Purchase Entity buys interest No step up in basis Entity owns insurance Alt Minimum Tax, concerns IRC Sec 101(j), concerns Fewer insurance policies Limited entities Cross Purchase Individual buys interest Step up in basis Individual owns insurance Alt Minimum Tax, n/a IRC Sec 101(j), n/a More insurance policies Various entities

17 17 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 17 Important Information The concepts presented herein are for informational purposes only and do Not constitute a recommendation that they are suitable for a particular individual or business. Neither American General Life Companies, nor its agents or representatives, provide legal or tax advice. Any comments about legal or tax treatment simply reflect the authors understanding of current interpretations of the federal tax laws as they relate to the planning technique. No coverage is given to state tax laws, which must also be considered. Tax laws are also subject to change in the future. Clients and prospects should consult their own legal and tax advisors to determine whether the recommended approach is appropriate for their circumstances. There are complex legal and tax implications associated with the strategy illustrated here. The information presented herein is not a comprehensive analysis of the topic presented. Clients must consult their own tax and/or legal advisors to determine whether or not any plan or program illustrated is appropriate for them and to understand all the benefits and risks of any premium financed transaction.

18 18 FOR PRODUCER USE ONLYNOT FOR DISSEMINATION TO THE PUBLIC 18 Important Information Policies issued by: American General Life Insurance Company 2727-A Allen Parkway, Houston, Texas The United States Life Insurance Company in the City of New York 70 Pine Street, New York, New York The underwriting risks, financial and contractual obligations and support functions associated with the products issued by American General Life Insurance Company (AGL) or The United States Life Insurance Company in the City of New York (USL) are the issuing insurers responsibility. Guarantees are subject to the claims-paying ability of the issuing insurance company. USL is authorized to conduct insurance business in New York. American General Life Companies, is the marketing name for the insurance companies and affiliates comprising the domestic life operations of American International Group, Inc., including AGL and USL. Important: Prior to soliciting business, be certain that you are appropriately licensed and appointed with the insurer and that the product has been approved for sale by the insurer in that state. If uncertain, contact your American General Life Companies representative for assistance. © All rights reserved


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