Common use of Planning Considerations Clause in Contracts

Planning Considerations. In planning the buyout provisions in shareholder, partnership or operating agreements, Code Section101(j) adds a new level of analysis to the equation. Complying with the notice and consent requirements is an easy first step. Even so, the impact of excess insurance proceeds should be addressed when one is relying on the exception for amounts paid to an insured's heirs under Code Section 101(j)(2)(B). In such a case, whether the entity or the family of the deceased principal receives the proceeds can affect whether the excess insurance proceeds will be included or excluded from gross income as the proceeds are excluded from gross income to the extent of the amount paid to the heirs. However, if the entity retains excess insurance, it may be