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An
Executive Bonus Plan is an excellent tool to reward
key personnel. The plan is simple and the
administration easy. Because the plan is considered
non-tax qualified, the employer retains full control
of who to reward, how much and for how long.
And, while offering an enhanced company benefit
package to key personnel, the company also enjoys
a federal income tax deduction.
At the core of the plan is a permanent life insurance
product, either whole life or universal life.
Life insurance is used because it's the only product
that provides a guarantee to pay a specific amount
at a specific time. With a piece of paper,
a drop of ink and pennies on the dollar, insurance
creates cash where none existed before, usually
far more than people can accumulate in their lifetime.
Are you interested in rewarding only key persons?
Permanent life insurance can offer several other
guarantees as well, such as a guarantee never to
expire, never to need renewing and the premium never
to increase. And unlike term insurance, which
just has a death benefit, premiums from permanent
life products can generate cash value. From
this cash value spring living benefits such as the
potential to earn dividends or interest, to use
the policy as collateral, or to borrow funds with
an interest rate as low as one or even zero percent.
For an excellent website on whole life insurance,
click Here.
Or, for universal life insurance, click Here.
When you invest in a policy you're investing for
the future: therefor it's important the company
you place a contract with be there should the need
arise to make a claim. As an independent,
Crown Financial Services is not limited to presenting
just one company, but can freely provide you with
the resources you need to make a sound, confident
decision. Contact
Us Today!
How The Executive Bonus Plan Works
Simple
design.
Easy administration.
The company enters into an agreement with
a key person.
Per the terms of the agreement, the key
person secures a personal life insurance
policy. This is usually a permanent
product, either whole life or universal
life. In addition to the federal income
tax free death benefit, permanent life insurance
offers the potential of living benefits,
such as tax deferred cash value accumulation
which can be used as collateral, for loans
or surrender.
The company pays the key person a bonus
equal to all or a portion of the premium.
To the company the bonus is tax deductible,
however, to the key person the bonus is
taxable as income. A company may often
choose to double bonus, structuring the
arrangement to reimburse the key person
for additional income taxes generated as
a result of the additional compensation.
To the company, the additional bonus is
also tax deductible.
The key person owns the policy, the cash
value and chooses the beneficiary(s). Because
the policy
is completely portable, the key person can
continue the benefit after conclusion of
the plan or employment. This is a
win-win for both the company and the key
person.
• Benefits
For The Company
Enhanced
company benefit package.
Freedom to choose which key persons to reward,
how much and how long.
Simplicity of design and ease of administration.
Federal income tax deduction.
Can be terminated at will. (per
the terms of the agreement)
• Benefits
For The Key Person
Completely
portable
life insurance protection, can be continued after conclusion
of the plan or employment.
The opportunity to generate tax deferred cash
value, with living benefits available
for use as collateral, loans or surrender.
