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ASSANTE ESTATE AND INSURANCE SERVICES INC.

Protect your business against

the departure of an owner

INSURED BUY-SELL AGREEMENTSHow an insured buy-sell agreement works

Here is a common structure used for a corporation owned by two shareholders, called the “Individually Owned Criss-Cross Method”.

Talk to your Assante advisor

Are you confident in your current plan for handling the departure of an owner? You may be interested in further information on insured buy-sell agreements. Talk to your Assante advisor to find out more.

Assante provides integrated wealth management solutions to simplify and enhance your life. Your Assante advisor will assess your financial requirements in order to choose the best solution for you from a number of leading financial service providers.

BUY-SELL

The surviving owner purchases the deceased

individual’s shares. And the estate, from the

sale, receives funds for distribution to heirs.

UPON DEATH OF AN OWNER

The surviving owner receives

the insurance proceeds tax-free.

LIFE INSURANCE

Each shareholder purchases a policy on

the other’s life, and the policyowner is the

beneficiary of the policy that he or she owns.

BUY-SELL AGREEMENT

A buy-sell agreement is established whereby,

in the event of death, the surviving owner purchases

the shares from the deceased owner’s estate.

This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. This material is not intended to provide, and should not be construed as providing individual financial, investment, tax, legal or accounting advice. You should consult your professional advisor(s) prior to acting on the basis of the information herein, and ask about the risks and costs involved when investing in insurance products. ®The Assante symbol and Assante Wealth Management are registered trademarks of CI Investments Inc., used under licence. 20-08-140109_E (08/20)

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Have you considered the consequences if a

co-owner was no longer with your company?

As the co-owner of a closely held corporation, you must consider the consequences of an owner suffering a disability or critical illness, passing away prematurely, or retiring from the business.

Let’s look at the case of an owner passing away. The individual’s business interest goes to the heir or heirs – the spouse, for example. You then have several options:

> Simply keep the heirs in the business, but this is rarely a viable option.

> Sell your interest to the heirs – also not a common choice.

> Find a new owner who will purchase the business interest.

> Sell the business.

The most preferred option is for the surviving owner or owners to buy out the heirs. This way you can continue to operate the business as you have successfully been doing for years.

But there’s just one problem: How will the surviving owners be able to afford buying out the business interest?

Your solution? An insured buy-sell agreement An insured buy-sell agreement consists of two phases – entering into a buy-sell agreement, and funding the agreement.

A buy-sell agreement documents each of the owners’ intentions for the future of the business if one of them was to die, become disabled or incur a critical illness. It establishes the conditions by which an owner can, has the option to or must purchase the ownership share of another owner.

Once the agreement is in place, it must be reinforced with proper funding to fulfill the intentions of the agreement.

In the event of an owner’s death, for example, the surviving owner or owners need funds to buy out the deceased owner’s interest according to the buy sell agreement the shareholders had previously agreed to. In addition the business will likely need working capital to replace the deceased persons contributions to the business.

When it comes to funding a buy-sell agreement, life insurance has many advantages over other funding alternatives:

THE ADVANTAGES OF AN INSURED BUY-SELL AGREEMENT

> Borrowing – You may be borrowing at a time when

you are charged a premium reflecting an increased

business risk. Also, repayments must be made with

after-tax dollars.

> Using a Promissory Note – The problem with planning

on a promissory note is that this option – when the time

comes – may not be viable for the estate. Even then,

it must be repaid with after-tax dollars.

> Using Business Earnings – There are different ways

to apply business earnings to buying out a deceased

owner’s interest, but all methods will deprive the

business of capital and limit potential growth.

> Selling Assets – Selling assets can involve numerous

financial setbacks, including receiving less than full

value, additional transaction costs and, of course,

loss of yield on assets.

Life insurance offers numerous advantages:

Cost-effectiveness – annual premiums are very low compared to eventual proceeds.

Flexibility – policies can be customized to meet a buy-sell agreement’s unique needs.

Tax savings – surviving business owners receive insurance proceeds tax-free.

Dependability – cash is guaranteed to be available when needed.

PROTECT YOUR BUSINESS

AGAINST THE DEPARTURE

OF AN OWNER