Key Man Protection
Safeguard the Continuity of Your Business
Almost every business has key employees who are essential to its overall success.
Key Employee Life Insurance is designed to protect a business from financial loss at the death of a key employee. This employee could be the owner of the business or an employee whose services or knowledge are crucial to the business and costly to replace.
Key Employee Life Insurance
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Provide cash to offset the loss of profits due to the death of a key employee.
- Provide funds to recruit and train a qualified replacement.
- Protect the company’s credit position by reassuring banks and other creditors that the company will have the resources to honor its obligations, even if it loses a key employee.
- Provide a financial hedge against a loss in business value.
Federal Income Tax
Life insurance proceeds are generally received free of federal income tax. However, if the policy does not meet the notice and consent provisions under Internal Revenue Code section 101(j), proceeds in excess of the amount of premium paid will be included in the employer’s income.
Because the business has an interest in the tax-free death benefit, premium payments are not tax deductible.
Alternative Minimum Tax
Death benefits and cash value accumulation may be subject to the Alternative Minimum Tax.
Heirs
If the employee is also a part owner in the business, proceeds can be used to buy the employee’s interest from the employee’s heirs or estate.
Eligibility
The employer can be selective about which employees to cover.
Key Employee Life Insurance may be used in most business entities.
IRS CIRCULAR 230 NOTICE
Any U.S. tax information included in this written or electronic communication, including any attachments, is not intended as tax advice, was not intended or written to be used, and it cannot be used by you or any taxpayer, (i) for the purpose of avoiding any penalties that may be imposed on you or any other person under the Internal Revenue Code or applicable state or local tax law provisions, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
Steps to building a Key Man Protection plan in Gulfport, Biloxi, Long Beach, Ocean Springs, Hattiesburg, Jackson & Pascagoula, Mississippi as well as Texas, Louisiana, Alabama, Tennessee & Florida.
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