Careers

Experiences

Industries

Offices

Our Firm

Pages

Our People

Updates

Practices

Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

Michigan Law Firm - Warner Norcross + Judd LLP

Earlier this year the United States Supreme Court issued its opinion regarding Connelly, as Executor of the Estate of Connelly v. United States which held that the value of life insurance proceeds used to redeem the shares of a deceased shareholder must be included when calculating the value of those shares for purposes of the federal estate tax.

core/paragraph

Specifically, the court did not believe that the contractual redemption obligation constituted a liability that would offset the insurance proceeds received as a result of a deceased shareholder.

This decision will directly impact all family and closely held business owners that have company owned life insurance intended to fund share redemptions upon an owner’s death. Business owners should reach out to their attorneys to review the current buy-sell agreements and discuss whether to restructure the life insurance. Options include:

Cross-purchase Agreements – theseallow each shareholder to own a life insurance policy on each of the other shareholders, the proceeds of which are used to purchase the deceased shareholder’s interest from their estate. This has tax benefits but can be difficult if there are several owners.

core/list-item

core/list

Special Purpose LLCs – these areowned by the shareholders and can be used to hold life insurance. If the company has several owners, this is simpler than a cross-purchase, but it must be structured carefully in light of the Connelly decision.

Insurance Trusts – these are available to hold life insurance and have it removed from the gross estate for federal estate tax purposes.

The choice of life insurance arrangement will depend on the value of the gross estate for federal estate taxes, the number of owners and the intended recipients of the proceeds. If you have questions about this ruling or how it affects your current succession planning, reach out to your Warner attorney or Jennifer Remondino.

Private Client and Family Office

Partner

Jennifer L. Remondino

Closely Held Businesses

Trusts and Estates

Recent Connelly Decision Affects Life Insurance for Closely Held Business Owners

Warner Norcross + Judd LLP is responsible for the contents of our advertising and this website. Please read our full <a href="/privacy-policy/" aria-label="see privacy policy">privacy policy</a> available on our website. If you have any questions or comments about our website or our Privacy Policy please contact us at <a href="mailto:info@wnj.com">info@wnj.com</a> or 616.752.2000.

Recent Connelly Decision Affects Life Insurance for Closely Held Business Owners

professionals