How to Avoid Valuation Problems with Life Insurance Associated with Buy-Sell Agreements

A Valuation Lesson on Video

One of the biggest and recurring problem with buy-sell agreements is their frequent failure to specify the role of life insurance proceeds in determinations of fair market value by appraisers when insured owners die.

From a valuation perspective, life insurance proceeds can be considered either funding vehicles or corporate assets, and the two treatments provide potentially disparate results. If the valuation results are potentially different, the likelihood of disagreement, disappointment, and litigation are high.

In the accompanying video, I provide a suggestion to solve the future valuation question (i.e., at the death of an owner) by agreement of the parties on the desired valuation treatment today (i.e., now, in the buy-sell agreement).

I mention my book, Buy-Sell Agreements for Closely Held and Family Business Owners, as the source for today’s valuation lesson.  It is available here.  Also available (complimentary) is my Buy-Sell Agreement Review Checklist.

Enjoy and be well!


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