A Matter of Trusts
Taxation in Australia Journal
Funding buy-sell agreements via insurance policies is a favoured option. Advisers should consider the merits of holding these policies via trust structures.
What is a buy-sell agreement?
A buy-sell agreement is an agreement that allows for the continuing participants in a business to “buy”, or the estate or family members of a departed participant to “sell”, the interest of the departed participant that is triggered on a specific event.
The trigger events are generally involuntary events, as alternate provisions are usually implemented to deal with other exits. The typical insurable involuntary events that would constitute trigger events, which are conditions precedent to performance under a buy-sell agreement, include:
death;
total and permanent disability (which may include dementia); and
trauma.
Buy-sell agreements are used to provide certainty to the participants in the business and their families as to what is to occur when one of these involuntary events is triggered.
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