Life Income Plan

Life happens

What happens if a small business or surgical practice has an unexpected death or early retirement of one its partners?


    ABC Surgical Centers, a successful multi-office practice with 10 partners, used a pay-as-you-go strategy to fund partner buyouts when due from operating capital. The partnership owned its real estate. Unfortunately, when one of the partners died unexpectedly, the buy-sell agreement in place lacked liquid funds to pay the full promised death benefit to the surgeon’s family. The partners had to make up the difference out of pocket.


    Surgeons Capital Management worked with the firm’s leadership and recommended a plan to potentially fix future funding gaps in the event of unforeseen circumstances. Here is a summary of benefits of this strategy to ABC Surgical Centers’ shareholders:

    • It provides liquidity to pay for buyouts due to early deaths or retirements
    • ABC Surgical Centers’ senior management retains control over all aspects of the plan and an asset that is owned by the company
    • It offers a mechanism to recoup all costs over the life of the plan


    Furthermore, by fully funding the ABC Surgical Centers’ plan, the company is able to improve its ability to recruit future shareholders, who generally prefer to align with organizations that have pre-funded their retirement obligations. It also improves the company’s bargaining position should it desire to sell the practice in the future.


    The benefits listed in this hypothetical case study, such as liquidity, death benefit, and asset retention by the company are funded using cash value corporate owned variable universal life insurance that tends to offer significant cash values in the early policy years because of its general lack of surrender charges and because, in the event of a full policy surrender within a certain number of years, some policy charges may be refunded. These policies often include a minimum guideline death benefit and are structured to minimize death benefit expenses yet retain the integrity of life insurance and the tax-deferral benefits.

Life Income PlanSM is a service mark of Corporate & Endowment Solutions, Inc. Used by permission.


12 Arlington Road, Suite 201

Devon, PA 19333