Cedar Point Federal Credit Union

Succession Strategies & Buy-Sell Agreement Agreements

There are four types of Buy-Sell Agreements:

1. Entity Buy-Sell Agreement
The business entity agrees to purchase the interests of the individual owners.

https://www.pennmutual.com/pmlwebsite/PML_Public/images/pdficon.gif  Entity Buy-Sell Agreement


2. Cross-Purchase Buy-Sell Agreement
All of the owners of the business agree to purchase the share of any owners.

https://www.pennmutual.com/pmlwebsite/PML_Public/images/pdficon.gif  Cross-Purchase Buy-Sell Agreement


3. "Wait and See" Buy-Sell Agreement
The owners and the business agree that either the owners or the business will have the first option to buy the interests of the owners who leave, depending on which is most advantageous.

https://www.pennmutual.com/pmlwebsite/PML_Public/images/pdficon.gif  Wait and See Buy-Sell Agreement


4. Disability Buy-Sell Agreement
This guarantees the sale and purchase of a business interest in the event of an owner's total disability. It can be set up as either an Entity or Cross-Purchase plan.

https://www.pennmutual.com/pmlwebsite/PML_Public/images/pdficon.gif  Disability Buy-Sell Agreement

Depending upon the legal entity of your business, a Buy-Sell Agreement can be established between:

  • You and your partners.
  • Your business and its shareholders.
  • You and other family members.
  • You and a key employee or employees.

The Buy-Sell Agreement should address these issues before they arise:

  • An instant market for the business interest is created.
  • The price and terms of payment are specified in advance.
  • Money is provided to fund the purchase of the business interest.
  • The business is allowed to continue without interruption.
  • The value of the business interest is established for estate planning purposes.
  • Estate liquidity to help pay estate taxes, debts and probate expenses.

Products for funding a buy-sell agreement.

By using a life or disability insurance policy as a funding source for your Buy-Sell Agreement, you have several advantages:

  • Financing is guaranteed whenever it is needed. Guarantees are based on the continued financial standing of the issuing company.
  • Proceeds are generally exempt from income taxation.
  • Cash values can be used for a buy-out due to retirement or disability.
  • Life insurance cash values and death benefits may be protected from creditors, depending on state law.
  • Protection against financial loss due to death and disability is obtained with the least amount of expense.
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This credit union is federally insured by the National Credit Union Administration
Your savings federally insured to at least $250,000
and backed by the full faith and credit of the United States Government.