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Conducting a Buy-Sell Review

Maximizing life insurance sales opportunities

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Disclosures

The Voya™ Life Companies and their agents and representatives do not give tax, legal or accounting advice. This information is general in nature and not comprehensive, the applicable laws may change and the strategies suggested may not be suitable for everyone. Clients should seek advice from their tax and legal advisors regarding their individual situation.

These materials are not intended to and cannot be used to avoid tax penalties and they were prepared to support the promotion or marketing of the matters addressed in this document. Each taxpayer should seek advice from an independent tax advisor.

Life insurance products are issued by ReliaStar Life Insurance Company (Minneapolis, MN), ReliaStar Life Insurance Company of New York (Woodbury, NY) and Security Life of Denver Insurance Company (Denver, CO). Within the State of New York, only ReliaStar Life Insurance Company of New York is admitted and its products issued. All are members of the Voya™ family of companies.

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The business market has many sales opportunitiesSales can be made to: Owners, key employees & the business itself

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Business owners invest a lot in their businesses

They invest:– Time– Money– Passion

With no guarantee of success

Most successful owners want to protect what they’ve built

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Ownership of a business is temporary!

Every owner will leave the business someday! Death Disability Retirement Sale to Outsiders Liquidation at Death

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Many owners have buy-sell agreements

These agreements are sometimes called “business wills”

These agreements provide some degree of control and certainty

Control over identity of the owners and the price / terms on which an owner can leave the business

Certainty that there is a buyer and that there are funds available to complete the purchase

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Buy-sell agreements may become out-dated over time

Over the years many things can change, including: The economics of the business The competition The amount of investment required to remain

competitive The commitment and health of the owners State/federal tax and regulatory laws The owners’ personal circumstances and objectives

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Buy-sell agreements make important promisesAgreements should be reviewed periodically to make sure the promises are realistic and can be kept

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Regular buy-sell reviews are important

Two important components of a buy-sell review

1. Review the terms of the agreement, including: Valuation formula / price Terms of payment

2. Review the funds backing up the agreement, including: Funding for when an owner sells during his lifetime Funding for when an owner’s interest is purchased at death Efficiency and viability of life insurance policies

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New life insurance sales may flow from a buy-sell review

Many agreements list death as a “triggering event”

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“We don’t really need a buy-sell review now, do we?”The challenge is to get their attention! Show them their agreement may have some “holes” in it

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Why a review is important now!

The value of the business may have changed

Tough economic times often reduce a business’ value

If the agreement isn’t revised, the remaining owners may wind up over-paying!

If this is a good time to make ownership changes, it may be possible to accomplish them at a reduced cost:– Redemptions

– Sales

– Gifts

– Stock bonuses

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New sales tools for buy-sell reviews

161434 – Important Questions in Buy-Sell Review

160850 – Questions for Buy-Sell Review & Life Insurance Funding Analysis

160851 – Buy-Sell Life Insurance Policy Review Factfinder for Business Owners

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Important Questions in Buy-Sell Review #161434

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Designed to ask challenging questions

Direct and simple questions

Questions they may not be able to answer

Motivate the owner(s) to find out the answer

May potentially give you an opportunity to demonstrate some special experience or value

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Questions about the agreement

Does your agreement cover all the important transition events?

Does the agreement prevent you from passing on your interest to your spouse, children or grandchildren?

Does your agreement require the purchase of a departing owner’s interest, or is the purchase optional?

Will the implementation of the agreement result in a change in voting control?

Is the agreement designed to favor the remaining owners or the departing owner?

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Questions about the funding

If the business was sold to outsiders today, how much would you want for your interest? How much would you get under your buy-sell?

If you had to sell your interest today, how much money would you get? How much has been set aside? Where will the rest come from? How long will you have to wait for it?

Suppose something happens and you have to buy out another owner: How much have you set aside? Where will the rest come from? How much time do you have to get it?

When was the last time there was a formal review of your agreement and its funding?

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Questions for Buy-Sell Review & Life Insurance Funding Analysis #160850

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Part one – Questions about the agreement

Additional Questions What are the triggering events covered? Have owners signed Personal Guarantees for

Business Loans? Are there any non-owner key employees and

have they signed non-compete agreements?

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Part two – Questions about the life insurance policies

Additional questions How does the inforce coverage compare

with current business value? Are ownership & beneficiary designations

consistent with the agreement? Are 101(j) forms necessary?

If so, are they in place? Is there Key Person coverage on each

owner-employee? Do the owners also have adequate personal

coverage apart from the buy-sell coverage?

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Buy-Sell Life Insurance Policy Review Factfinder for Business Owners #160851

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Buy-sell life insurance policy review factfinder

A fact-gathering tool to help answer these questions:

What is the state of each policy today? How is each policy likely to perform in the future? What other life insurance options are available? Are the life insurance policies a good value

today and in the future?

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Three new sales tools for buy-sell reviews

161434 – Important Questions in Buy-Sell Review

160850 – Questions for Buy-Sell Review & Life Insurance Funding Analysis

160851 – Buy-Sell Life Insurance Policy Review Factfinder for Business Owners

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Buy-sell reviews can lead to new life insurance sales

Buy-sell funding

Key person insurance (Owners and key employees)

Executive benefit sales– Personal life insurance for owners

– Personal or business-owned life insurance for key employees

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Every owner will leave the business someday

Advance planning can make the transition easier!

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Thank you!