Now completely revised and updated, The Insured Stock Purchase Agreement
explains how a stock purchase agreement can be a successful tool for ensuring the harmonious continuation of the closely held corporation and solving the estate planning problems of its stockholders. The book details how a properly drafted and funded stock purchase agreement can accomplish these important planning objectives:
- Protect the corporation and existing stockholders against unwanted new stockholders
- Provide liquidity to a stockholder or his or her estate on a favorable income tax basis
- Fix the value of a stockholder's stock for death tax purposes
- In the case of an S Corporation, ensuring continuation of the S election
The book's authors, both well-known in the areas of estate planning and life insurance, explain the various types of stock purchase agreements that are used:
The Insured Stock Purchase Agreement
- Stock redemption
- Combination of redemption and cross-purchase
- Wait-and-see buy-sell
explains the advantages and disadvantages of each of these options from a tax planning perspective as well as discussing the non-tax considerations in choosing between the different agreements. It answers critical questions such as how to determine the purchase price in the event of voluntary or involuntary transfer of shares and to fix the estate tax value. The book also considers different funding options and methods of payment for a purchase of shares during the life of a stockholder or for purchase at the stockholder's death. One chapter is devoted to state law considerations, including general information on community property states and a summary of various state laws, while another chapter focuses on S Corporation concerns in drafting buy-sell agreements.
Exhibits in The Insured Stock Purchase Agreement
include a comparison of stock redemption and cross-purchase agreements, a table of the Rules of Attribution to corporate stock redemptions, and a sample form stockholder's agreement with drafter's notes.