Accredited Wealth Management Advisor Practice Exam

The ideal owner of life insurance policies funding buy-sell agreements should be the person obligated to purchase. This arrangement is designed to ensure that the necessary funds are readily available for the purchase of a deceased owner's interest in the business. By having the purchasing party as the policy owner, it allows for a seamless transition of the ownership stake and prevents potential financial strain on the deceased's estate, enabling the business to continue operating without disruption. Additionally, this structure provides two key benefits: it ensures that the policy's proceeds will be directed toward the agreed-upon buy-sell arrangement, and it supports the tax implications favorable to both the seller's estate and the buyer. The party responsible for the purchase possesses a vested interest in the policy and can facilitate the process more effectively, ensuring that the funds are used as intended to uphold the terms of the buy-sell agreement. In contrast, having the insured or the estate of the insured as the owner presents complications regarding the access and use of policy benefits. Lastly, having the primary beneficiary as the owner could lead to conflicts of interest and may not serve the best purpose of efficiently transferring ownership in a business context.