Stock Redemption Agreements are buy-sell agreements where the company owns life insurance policies on each partner. When a partner dies, the company buys out the deceased partner’s estate with the insurance proceeds. This retires the deceased partner’s stock and increases the surviving partner’s interests proportionally. Stock redemption agreements differ from Cross Purchase Agreements, where the partners own the insurance policies.
There are pros and cons to different funding arrangements in buy-sell agreements. A competent exit planning advisor can provide personalized guidance.
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