For the longest time, farms were unincorporated and ran by families.
Today, I am seeing a large number farmers setting their operations up as LLCs, S-Corps, and Corps for both tax and legal reason. It’s a good thing, because farms are businesses and should be run like a business.
It’s wonderful to see the planning going into this and with that comes the question, “Can my corporation own the life insurance policy?” The short answer to that is yes, it can.
Along with the short answer are a few things you must also know.
The cash value now becomes an asset of the corporation and is subject to lawsuits.
The corp can pay the premium but can not expense it. If you did this you would be paying tax on the growth of the policy when you take loans.
The beneficiary can be the corp, a person or a trust.
The policy must be written on the life of a key man or shareholder of the corporation.
The final note, if the corporation owns the policy that corp should do nothing but hold the money. That will eliminate the chance of those funds being touched by a lawsuit. I am not an attorney so be sure you have an attorney help you with this structure…..it’s a lot less expense to hire one before you get sued.
As usual please call with questions or pick up the book so you can get started on the right path right away.