10. Should an owner want to sell his business, this is a great plan to retain key employees. The greatest advantage is two-fold: this plan cost the employee nothing, and the owner, in most cases, recovers all of the plan's costs and expenses. Mr. Jones will provide Michael's family a salary continuation paycheck of $35,000 for 10 years commencing 90 days after Michael's death. The balance of the cash value or the death proceeds will go to the beneficiary Tax-Free, in this case is Mr. Jones. This scenario, in most cases, will not only help recoup the premiums paid to fund the plan, but also the means to recruit, hire, and train Michael's replacement. Other Financial Planning Strategies for the Business Owner: Leveraged Executive Bonus, in which the employer 1) bonuses a key executive an amount equal to the premium on a personally owned life policy and 2) loans the funds to pay the tax on the bonus. Leveraged Deferred Compensation couples a reduction in an executive's compensation with loans from the employer, which are used to pay the premium on an executive-owned life insurance policy. Unlike the typical deferred compensation arrangement, this arrangement produces tax- free retirement income (via policy loans). The concept provides an irresistible executive benefit for any executive who can afford the compensation reduction and typically produces a credit to earnings for the employer in all years. Leveraged 401(k) Look-Alike — This arrangement is similar to Leveraged Deferred Compensation but is designed to be marketed as a COLI alternative that provides producers tax-free income (via policy loans) These corporate based financial strategies are superior means to funding executive (owners) retirement programs. "Are you working on your business, or is your business working on you?"
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