When Sarah, the owner of a successful manufacturing company, realized only her eldest son was active in running the business while her other two children pursued different careers, she worried about fair inheritance. She wanted the child involved in the business to inherit it without disinheriting the others. That’s when WiseInvest™ introduced a strategic solution involving corporate life insurance and a new class of shares.

The Strategy

1. Corporate-Owned Life Insurance
   The corporation purchased a life insurance policy using pre-tax corporate dollars, rather than Sarah’s personal after-tax income. This approach leverages tax efficiencies within the company.
2. Life Insurance Shares (LIS)
   WiseInvest™ helped create a new class of shares, dubbed Life Insurance Shares (LIS). The policy’s death benefit was allocated to the LIS, which the two non-active children now own.
3. Estate Equalization
   Because the life insurance proceeds flow to the LIS holders tax-free, Sarah effectively converts a portion of her corporate taxable assets into a tax-free benefit for the other two children. Meanwhile, her eldest son continues as the primary shareholder of the operating company.

Why it Works?

• Fair Distribution: The active child inherits the business, while the others receive the death benefit through the LIS, ensuring each child’s share of the estate is equitable.
• Tax Efficiency: By using corporate pre-tax dollars, Sarah avoids paying personal taxes on insurance premiums and minimizes taxes on the ultimate payout.
• Preserved Family Harmony: Clearly designating roles and inheritance reduces potential disputes and keeps the business intact.

If you’re facing a similar dilemma about family business succession planning and need estate equalization, let WiseInvest™ show you how strategic corporate life insurance solutions—and the creation of LIS—can protect both your legacy and your family’s future.

*Note: For privacy reasons, the names and nature of our clients’ businesses have been changed.