Life Insurance Question

[Denne]

I have a partnership client that is considering moving from a PLLC to an S Corp. They have an insurance policy that was just written that will pay the PLLC upon the death of either partner. They have it written up that the company will get a portion to keep the company going and the spouse of the partner that passes will get the remainder. The insurance agent just told them they the policy would pay to the company only. He said the wife would need to receive a distribution from the company....he said in the form of a payroll check. I am not sure if he is looking at it as a corporation or a PLLC really. I have no idea why the spouse can't recenve the payment directly from the insurance company for their portion...a stated dollar amount and the company receive the other portion. Am I just not seeing the situation there correctly? Any advise on the best way to write this policy or whether they should actually request the S Corp change?

Thanks for your opinions ;~)

[OldJack]

I'll bet you think we all know what a PLLC is. I guess it is a partnership that is a LLC. The insurance agent is probably thinking that the policy would be with the S-corp. A LLC that elects to be an S-corp has to act like a S-corp for federal tax purposes.

[cred65]

If the PLLC is in fact taxed as a Form 1065 (as Old Jack inquired above msg #2)what are the reasons for the reclassifaction?

To avoid the SE Tax?

What are the operating assets of the LLC?

Is there rentanl property involved?

In order for a proper analysis more info is needed.

But probably the best advice is to tell the client to get Legal Advice because your question may be beyond the scope of this board.

[Terry D EA]

PLLC - Professional Limited Liabilty Company. More info is need for analysis.

Terry D.

[B. Jani]

When a life insurance policy is written as buy-sell agreement between the partners, the owner and beneficiary of the policy is company(corporation/PLLC etc). NOT THE INDIVIDUAL. Upon death of the insured, the owner (company) get the death benefit. Check with the insurance company if current owner PLLC can be changed to the new Corporation or not.

Hope this helps.