Family Owned Motel--Partner Succession Planning Life Insurance Help Needed

[mkcvol75]

Hello Everyone,
I was looking for some help with a tax client of mine.
It is an S Corporation with 6 Partners. 2 Parents both in their late 70s. The other 4 are their 4 sons.
Motel worth 5 million and it will go to the 4 boys.

If something happens to one of the boys, they want something set up for the company to buy out the spouse of the percentage of the deceased.

Here are the problems faced.
2 of the 4 sons work at the Hotel currently.
1 lives in a different state and has nothing to do with hotel except his partnership percentage
the last son is not well physically. He is not able to work at this time. In the past he had a liver transplant and has other physical issues and may not qualify for life insurance.

Any ideas of how to set up these policies and steps to protect the partners would be appreciated very much

 

[Lloyds of Lubbock]

Are you working the firms legal counsel?
As an insurance agent you are providing the funding not the legal advice.
You will probably want to set up an llc as a special purpose entity to hold the life insurance.
Have they actually done a biz valuation, how did they come up with 5 million?

 

[producer1]

@mckvol75 - our business consulting firm works with small business clients just like your client. You mentioned that this is a tax client of yours which indicates that you are a CPA. If so, I'd love to chat with you offline about this. My email is [email protected] if you're open to it.

 

[DHK]

If something happens to one of the boys, they want something set up for the company to buy out the spouse of the percentage of the deceased.

That's not "key man". Key man has to do with buying time or preserving profitability until a new person can be found to replace that key person's abilities.

Your post is about buy/sell planning of the business interest.

It helps if you ask the right questions.

 

[Lloyds of Lubbock]

Key Man insurance is a policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of an important member of the business.
It does not replace "abilities" it protect financial losses.
I did not see in the original post any mention of Key Man.
It looked to me to be all about succession planning

 

[mkcvol75]

thank you both for the assistance in the title name change.
Sorry for the confusion
I am open to help
[email protected]

 

[Lloyds of Lubbock]

I dont know who you are licensed with but most firms have an advanced planning department, you may want to start there

 

[DHK]

Key Man insurance is a policy taken out by a business to compensate that business for financial losses that would arise from the death or extended incapacity of an important member of the business.
It does not replace "abilities" it protect financial losses.
I did not see in the original post any mention of Key Man.
It looked to me to be all about succession planning

It was in the thread title, but he corrected it.