Transfering the Business, Still Wanting the Insurance

LGilmore

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It has been a long while since I dealt with a situation like this so I am asking to see if any of you have come across it.

LLC where parents are selling to son.

Can we provide health insurance to parents through the LLC plan, even though no longer part of the business?

Do we have to set up another LLC (split real estate / company on site) and cover them through a new LLC?

I did one of these over 20 years ago and back then we insured the former owner through a subsidiary business. She because of the situation (death) could not have direct ties with the primary business for a decade I believe. (long time ago) but we could insure her via the sub.

While this is not a death, does any body have any experience with a similar situation?

Another thought is just have the LLC Pay for their insurance as part of the sale and it comes to them as income.

Or you can discriminate by class with group health do we allow for management to have continued coverage up until retirement through the plan?

Any feed back is appreciated. I will be looking myself as well.
 
It has been a long while since I dealt with a situation like this so I am asking to see if any of you have come across it.

LLC where parents are selling to son.

Can we provide health insurance to parents through the LLC plan, even though no longer part of the business?

Do we have to set up another LLC (split real estate / company on site) and cover them through a new LLC?

I did one of these over 20 years ago and back then we insured the former owner through a subsidiary business. She because of the situation (death) could not have direct ties with the primary business for a decade I believe. (long time ago) but we could insure her via the sub.

While this is not a death, does any body have any experience with a similar situation?

Another thought is just have the LLC Pay for their insurance as part of the sale and it comes to them as income.

Or you can discriminate by class with group health do we allow for management to have continued coverage up until retirement through the plan?

Any feed back is appreciated. I will be looking myself as well.

Group plans only cover employees. So no. If they are not part of the firm you are going to be out of luck most likely.
 
I think the thought was not to pay income on the premium.

Depending on the plan and size of the group, "retirees not Medicare ready" can stay on some plans, paying the premium like Cobra, but not via Cobra. I'm getting ready to do this next year. Well, depending on what next year is in health care..

This transaction involves a stock sale and so there would be a ten year hands off. I don't think there is a way to do it and not have income be involved.
 
I think the thought was not to pay income on the premium.

Depending on the plan and size of the group, "retirees not Medicare ready" can stay on some plans, paying the premium like Cobra, but not via Cobra. I'm getting ready to do this next year. Well, depending on what next year is in health care..

This transaction involves a stock sale and so there would be a ten year hands off. I don't think there is a way to do it and not have income be involved.

What's the group size, I think that will play a significant role in the answer.

But my first response is: ask the carrier what they are going to need to keep them on the plan.
 
What I am finding is there has to be some income somewhere, so if I subsid them (another bus) they need a w2, if we pay their premiums through the sale, it's income. So right now not thinking we can do it without it being income somewhere.
 
It has been a long while since I dealt with a situation like this so I am asking to see if any of you have come across it.

LLC where parents are selling to son.

Can we provide health insurance to parents through the LLC plan, even though no longer part of the business?

Do we have to set up another LLC (split real estate / company on site) and cover them through a new LLC?

I did one of these over 20 years ago and back then we insured the former owner through a subsidiary business. She because of the situation (death) could not have direct ties with the primary business for a decade I believe. (long time ago) but we could insure her via the sub.

While this is not a death, does any body have any experience with a similar situation?

Another thought is just have the LLC Pay for their insurance as part of the sale and it comes to them as income.

Or you can discriminate by class with group health do we allow for management to have continued coverage up until retirement through the plan?

Any feed back is appreciated. I will be looking myself as well.

I haven't done (or seen) this since Obamacare, but . . . .

Option #1: You can choose to include retirees in a group health plan. Because it is a retiree benefit, it is deductible to the business and non-taxable to the retiree. I'm not sure if today's small group plans will allow for retirees to be on the coverage; I suppose I should know, it just hasn't come up.

Option #2: As part of a formal retirement program, retiree health insurance can be included. The retirement plan then buys the insurance. This requires a FORMAL retirement program, and you will need a lawyer who knows how to draft the needed documents to establish the program.

Now, putting on my tax preparer hat, an LLC is a "disregarded entity" for tax purposes (unless a special election has been made via form 8832); this means the IRS will look at it as the son simply paying for mom & dad's health insurance under option #1, which won't be a deductible business expense. If instead of mom & dad, it was Ethel & Frank who aren't related to son, son might have a better shot at getting the IRS to go along with it. Now, if the LLC elected to be taxed as a corporation AND there was a written agreement for the continued health insurance for retirees (and all retirees got the benefit, not just mom and dad), then the deal can happen. But electing to be taxed as a corporation has its own set of issues to consider.

Finally, be aware that there are recent regulations tied to Obamacare that no longer allow the deduction (against business income) of insurance policies issued to an individual and then paid for/reimbursed by the employer; so, that won't be an option. [Note: this new regulation does not apply to an employer that only has one employee.]
 
Make them salaried employees as Senior business analysts (consultants).

Simply withdraw their portion of the health insurance out of their annual /monthly/semi-monthly pay stub. Gross pay them the exact cost of their portion of benefits (if any).
 
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