Retiring and perpetuating the business to key employees

Situation:

A contractor was reaching the twilight of his career and wanted to explore selling his company to his key employees within a seven-to-ten year period.

Action Steps:

The company was profitable and had retained earnings. The owner wanted to maximize his profits, have flexibility, and provide an opportunity for others who helped grow the company to be successful.

Grant, Hinkle & Jacobs recommended that the company fund a specially-designed life insurance contract over a four year period on the lives of his key employees. When the owner decides it is time to retire, the company will take tax-free loans from the policy and bonus the money out to the key employees, who will in turn give the money to the owner in exchange for company stock.

If any of the employees leave prior to vesting of the benefit, the values in the life insurance remain with the company.
In addition to providing a buyout mechanism, there is key man coverage on all key employees from inception to vesting.

Results:

The client is delighted that he can move ahead with the transition of his business to key people and confident that he can retire on his own terms with company assets earmarked to provide him and his wife with retirement income for as long as they live.