Last week, the Supreme Court issued its long-awaited opinion in Connelly v. United States (No. 23-146) on whether a corporation’s obligation to apply the amount of proceeds from corporate-owned life insurance to fund a mandatory redemption of stock on the death of a shareholder reduces the value of the corporate assets (i.e., offsets the insurance proceeds received by the corporation) when valuing the stock in the estate of the deceased shareholder. In a resounding taxpayer defeat by unanimous opinion, the Supreme Court said “no” and resolved a split between the Eighth Circuit in Connelly v. United States, 70 F.4d 412 (2023), and the Eleventh Circuit in Estate of Blount v. Commissioner, 87 TCM 1303 (2004), aff’d in part and rev’d in part, 428 F.3d 1338 (2005).
This fall’s Tax Planning Forum programs will discuss Connelly and a workaround that easily can be implemented in many closely held business situations by using a partnership to own the insurance, rather than the corporation, and thereby not increase the value of a decedent’s stock for estate tax valuation purposes by the corporation’s receipt of insurance proceeds. We will discuss how the partnership should be structured to meet the goals of the shareholders, which mirrors what would have occurred from an economic perspective had the policy been owned by the corporation. We also will delve into how to transfer insurance policies out of a corporation and avoid the impact of the §101(a)(2) transfer-for-value rules that can cause taxation of the life insurance proceeds, if those rules are not carefully navigated.
Register for a Tax Forum program by July 31, 2024 and enjoy the Early Bird discount. Connelly and many other flow-through planning transactions will be discussed in detail at our 2024 Tax Forum programs that begin this fall, and we expect spirited discussion during our live Q&A sessions. As a reminder, the early-bird discount for registration ends on July 31, 2024, so register now.
For those of you and/or your team members who plan to attend our in-person programs in Las Vegas or Orlando, please keep in mind that capacity at those venues is limited.In the meantime, we are always happy to spend a few minutes addressing any questions related to flow-through or closely held business matters that come up in your practice – even if they are outside the parameters of the programs you have attended or plan to attend. Please do not hesitate to call us at 800-286-4760 or email any of the Tax Forum faculty members.
Michael Cohen: mjcohen@lgclaw.com
Chuck Levun: crlevin@lgclaw.com
Scott Miller: skmiller@lgclaw.com
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