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Family business life insurance and estate valuation in Georgia

Many Georgia families own businesses intended to be passed in succession to estate heirs after the owners’ deaths. A wide variety of issues and details regarding family businesses can impact estate valuation. In particular, whether to use a life insurance policy as a means of family business succession planning is a matter that estate owners who own businesses may want to consider.

Life insurance owned by a business is typically able to be included as an operating asset in the valuation of that business. Therefore, a business and estate owner may find it in the best interests of business succession, as well as estate planning, to use life insurance to an advantage. Proceeds from insurance owned by an individual are considered part an estate’s assets. However, when a business owns the insurance policy, the funds are typically paid to the business itself and are not included as taxable income against an estate.

The insurance policy purchased by a family business would be owned on the business owner’s life. The business would pay premiums and would be considered the beneficiary of the policy proceeds at the time of the owner’s death. There are buy-sell agreement options that allow a business to use those proceeds to purchase business interests from the owner’s estate, which then allows the estate executor to use that money to settle the estate.

Such matters are often complex and best understood through the counsel and guidance of an experienced probate and estate administration attorney. Any Georgia resident who has questions about estate valuation or family business planning succession as it relates to an estate may seek answers by contacting an attorney to discuss the issues. An attorney can help a business and estate owner make informed decisions regarding the passing of wealth to loved ones after death.

Source: wealthmanagement.com, “Life Insurance’s Role in Family Business Planning“, Vernon W. Holleman, Feb. 26, 2016

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