Buy-Sell Agreements with Indexed Universal Life Insurance

Buy-sell Agreements with Indexed Universal Life Insurance can provide powerful risk management protection. In business, there are often key individuals on whom the business depends.

When Kate Laramy’s husband passed away from an accident, she was devastated. Not only was she facing life without Ken, but she would now be a single mother raising six children.

Unfortunately Ken did not have a personal life insurance policy that could have left her a tax-free death benefit. She was worried how she would make ends meet long-term.

Then she learned she would be receiving $1 million from a policy her husband’s business had opened on Ken for this very reason.

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She discovered that as part of their business planning, both Ken and his partner had life insurance policies in place as part of a buy-sell agreement.

Should either partner pass away prematurely, the life insurance policy would serve to “buy out” the deceased partner’s share of the company.This would empower the remaining partner to proceed with full ownership of the company, and serve to help the deceased partner’s family with a valuable tax-free lump sum.

In Kate’s case it was some of the best news she had received in a long time. She decided to open a LASER Fund policy with the money. She has been able to move forward, knowing she will have enough to provide for her children and enjoy a good quality of life throughout the rest of her years.


The LASER Fund can be used for exactly this type of buy-sell agreement, which makes for an excellent “exit strategy” in business planning.

Whether partners decide to leave the company, they pass away, or they become disabled, the insurance compensates the remaining partner with money to buy out the company.

In the case of death, most attorneys will arrange for the money to go directly to the widow. That way, it can be possibly transferred tax-free, helping the widow avoid capital gains tax on the “sale” of the business.

And it also helps make the transition simple, without the widow “inheriting” partnership in the business and having to decide if he or she wants to take on running a company. It also helps the remaining partner avoid the awkwardness of deciding if that’s even plausible.


The LASER Fund can also be used for business planning in the form of “key person insurance.” Here, The LASER Fund is used to cover the economic value of a key person in a business.

For example, if a CEO is integral to a company’s brand or financial success and were to suddenly die, the policy provides tax-free capital to be transferred to the business. This can help the company recover from the loss of the primary figure in the business.

This strategy can be valuable for many companies, large and small. There are also options in how it can be structured.

While some companies may choose to maximum fund the policy, other companies choose to minimum fund the policy for the maximum amount of death benefit they desire. (In this case, the goal is to keep costs low.)

What’s more, should the key person reach retirement alive and well, the policy ownership can be transferred to the key person. The key person can then choose to maximum fund the policy and name her or his loved ones as beneficiaries.

At this point, the key person can use The LASER Fund in all the same ways we describe in the book. It can be used for an income-tax-free death benefit for the family, as well as living benefits, such as retirement income, working capital for future business ventures, etc.


Live Abundant has taken advantage of The LASER Fund as key person insurance. As the longtime face of the company, Doug Andrew’s role as a national thought leader, bestselling author, radio show host, and speaker has made him a central figure for the work we do.

While Emron and Aaron, Doug’s sons, and other members of the management team are taking on more of those roles, at this moment, if Doug were to suddenly pass away, the company would benefit from additional resources to continue the momentum (and of course, time to mourn the loss of Doug!).

For that reason, the company has taken out key person insurance on Doug. This gives the company and all of its employees the reassurance that there will be plenty of capital to continue work as usual and make plans for further growth.

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*Life insurance policies are not investments and, accordingly, should not be purchased as an investment.

Names have been changed and a few identifying details have altered to preserve privacy.

The LASER Fund is an indexed universal life insurance policy. This article is not intended to provide comprehensive information regarding Indexed Universal Life insurance policies. This is general information only. Each insurance product will have specific features, benefits, and limitations.

Tax laws are subject to change, and you should consult a tax professional. Seek professional tax advice for your specific situation.