Some cross-purchase agreements use a dollar amount to calculate the buy-out price, while others use a formula. A valuation of the interest that is the subject of the agreement should be made periodically.
A Cross-Purchase Agreement with Life Insurance to Fund Purchase of Deceased Partner's Interest -- Proceeds Payable to Decedent's Beneficiary in Installments is an arrangement by which two or more parties purchase life insurance on the life of a deceased partner and use the proceeds to purchase the deceased partner's interest in the business. The proceeds are paid to the deceased partner's beneficiary in installments. There are two main types of Cross-Purchase Agreements with Life Insurance to Fund Purchase of Deceased Partner's Interest -- Proceeds Payable to Decedent's Beneficiary in Installments: 1. Buy-Sell Agreement: This type of agreement is used when the party purchasing the deceased partner's interest is the remaining business partner or partners. This type of agreement utilizes life insurance to fund the purchase of the deceased partner's interest. 2. Redemption Agreement: This type of agreement is used when the party purchasing the deceased partner's interest is the business itself. This type of agreement also utilizes life insurance to fund the purchase of the deceased partner's interest.
