Question

In connection with a "buy-sell" agreement funded by a cross-purchase insurance arrangement, business associate Adam bought a policy on Burr's life to finance the purchase of Burr's interest. Adam, the beneficiary, paid the premiums and retained all incidents of ownership. On the death of Burr, the insurance proceeds will be____________.

Answer 1

Excludable from Burr's gross estate

Step-by-step explanation:

Buy-sell" agreements are excludable from a decedent's estate provided the agreement:

1) is a bona fide business agreement;

2) is not a device to transfer property to the decedents family for less than full and adequate consideration; and

3) has terms similar to those entered into by persons in arm's length transactions.

As the "buy-sell" in this case meets the requirements for being excludable from the decedent's estate, the insurance proceeds will be excluded from Burr's estate upon Burr's death.