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The Nine Different Buy-Sell Strategies

in the ING Life Companies Buy-Sell Wizard

Traditional Entity Purchase

The business purchases the ownership interest of a deceased or departing owner.

Entity Purchase
Traditional Section 303 Redemption Short Tax Year (S corp only)

Section 303 Redemption

This is a purchase of part of a deceased owners interest under IRC Section 303 which permits the business to redeem some stock from the owners estate to provide estate liquidity. The value of the ownership interest redeemed may not exceed the total of the deceased owners funeral costs, medical expenses of last illness, estate administration costs and federal and state estate taxes. In order to use this option, the value of the deceaseds business interest must constitute at least 35% of the adjusted gross estate.

Section 1377 Short Tax Year Election (cash basis S corps only)
This strategy is designed to help the surviving owners receive the full basis increase for life insurance death benets that are paid to a Subchapter S corporation when it receives life insurance death benets as the policy beneciary.

Traditional Cross Purchase

The remaining owners purchase their pro rata share of the business interest of a deceased or departing owner.

Cross Purchase
Traditional ILIT Buy-Sell Trusteed Cross Purchase Buy-Sell General Partnership Buy-Sell

The ILIT Buy-Sell

It may not be wise for owners wealthy enough to have federal estate tax problems to personally purchase any of the business interest owned by a deceased or departing owner. Such a purchase could increase their federal estate tax liability. As an alternative, they can establish an Irrevocable Life Insurance Trust (ILIT) to purchase their pro rata share of that interest. The ILIT trustee enters into the buy-sell agreement with the other owners.

The Trusteed Cross Purchase Buy-Sell

In this buy-sell structure the owners enter into a cross purchase agreement and establish a trust to own the life insurance policies funding it. The trustee collects the funds needed to pay premiums and purchases/owns the policies. The trustee receives the death benets when an insured owner dies. It is most often used when there are three or more owners so only one policy is needed on the life of each owner.

General Partnership Buy-Sell

In this buy-sell structure the owners enter into a cross purchase arrangement and establish a general partnership to own the life insurance policies funding it. The owners contribute the funds the partnership needs to pay the premiums. At an owners death the partnership receives the death benets and distributes them to surviving partners so they can purchase their pro rata shares of the deceaseds interest from his/her estate. This buy-sell structure appears to avoid potential transfer for value problems after the rst owners death.

Wait & See Buy-Sell

This is an extremely exible buy-sell structure because it does not dictate who will purchase a departing owners interest. When a triggering event occurs, a series of purchase options is activated so the remaining owners can customize the ownership of the departing owners interest to meet their needs going forward. If some of the departing owners interest remains available after the purchase options have expired, then the business will purchase the remaining interest.

Flexible Buy-Sell Strategies

Wait & See Buy-Sell Own Your Own Policy Buy-Sell

The Own Your Own Policy Buy-Sell

Rather than purchasing a policy on the other owners, it may be advantageous for each owner to purchase a policy on his/her own life and assign part of the death benet to the other participating owners so they can purchase his/her interest if he/she dies. Each owner controls his/her own life insurance policy (within the terms of the buy-sell agreement) and may take it with him/her if he/she retires or leaves the business during his/her lifetime.

For agent use only. Not for public distribution.

Your future. Made easier.

There are many different structures of buy-sell arrangements and methods to manage the life insurance policies that fund them. The new Buy-Sell Wizard on ING Presents can help you nd the type of buy-sell arrangement that may best suit the particular business owners needs. The Buy-Sell Wizard is available on ING Presents and also in a print version. For more information, contact your ING Life Companies' representative or ING Insurance Sales Support at 866-ING-SELL (866-464-7355).

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. The ING Life Companies and their agents and representatives do not give tax or legal 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. 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). Variable universal life insurance products are distributed by ING America Equities, Inc. 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 ING family of companies. For agent use only. Not for public distribution. 2011 ING North America Insurance Corporation bcn66241102013, bcn66399102012

158211 05/12/2011