Can a partnership use a partner's family term life insurance policy as a business expense, with the intention of using the policy as a way to buy out the spouse's interest in the business?
We are setting up key man policies, and one of the spouses asked whether the business could pay for the family's term life insurance policy as a benefit from the business.
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There's the nature of the policy (term life or permanent life?). There's the owner of the policy (the business? Or a cross-purchase by partners?). There's the amount of the policy (is it sufficient to pay the value of the partner's share of the business?). There are tax issues, depending on how the payment of premiums is arranged.
The business owners should speak with their insurance, accounting and legal advisors to make sure that the policy they choose best suits their needs.