Do you meet with Michigan business owners in person?

Yes. CentraLife is headquartered at 290 Town Center Dr in Dearborn, and advisors meet business owners across metro Detroit and the state in person — or by phone and video for the rest of the country. We’re licensed in 49 states, and you can verify our Michigan licensing through the state regulator, DIFS, at michigan.gov/difs.

Are business life insurance premiums tax-deductible?

Generally no — IRC §264 blocks deductions for premiums when the business is a beneficiary, and anyone promising “deductible life insurance” deserves a second opinion. The real tax story is on the other end: death benefits received income-tax-free (when §101(j) is satisfied for employer-owned policies), cash value growing tax-deferred, and §162 bonus plans where the premium IS deductible because it’s the employee’s compensation. Structure determines everything, which is why we design with your CPA.

We already have coverage a bank required years ago. Is that enough?

A lender minimum answers the lender’s question — will the loan get repaid — not yours: will the company survive, will the buyout get funded, will the family get bought out at real value. Coverage placed to close a loan is also where we most often find §101(j) paperwork gaps and valuations three cycles stale. The in-force review is free and specific: what you have, what it actually does, what’s missing.

How much life insurance does a business owner need?

Size it from obligations, not from a multiple. Add up the four exposures separately: the revenue and lender covenants exposed to one key person, the buy-sell obligation at the CURRENT valuation, any personal debt or income the household depends on, and the cash an estate would need at settlement. Working conventions exist — key-person coverage is commonly quoted at 5–10× compensation, and lenders set their own floor — but the buy-sell number should track today’s valuation, not the one in the 2019 agreement. For deaths in 2026 the federal basic exclusion amount is $15,000,000 per person, so for most owners the binding problem is illiquidity, not federal estate tax.

What happens to a business when one partner dies and the buy-sell is unfunded?

The surviving owners still owe the estate the agreement price — from company cash flow, a loan taken when the bank is most nervous, or an installment note that keeps the family on the cap table. Funded properly, life insurance delivers the money income-tax-free at the exact trigger. The ownership choice matters: after Connelly v. United States (2024), proceeds a company receives to redeem a deceased owner’s shares increase the company’s value for estate tax, while a cross-purchase keeps the proceeds outside the company and gives buyers a basis step-up. Have your attorney re-read any redemption-style agreement written before 2024.

Is key person insurance the same as buy-sell coverage?

No, and owning one does not solve the other. Key person coverage replaces what the business loses when the person revenue depends on dies — the company owns it, the company is paid, and IRC §101(j) notice-and-consent plus Form 8925 decide whether the benefit is tax-free. Buy-sell funding pays for equity: it puts cash in the hands of whoever is obligated to purchase the deceased owner’s shares. Many closely held companies need both, plus the owner’s own personal coverage, which is a third policy with a third owner.

For Business Owners & Partners

The business is the estate. Insure it like one.

Most owners carry the company’s whole risk on their own pulse: the revenue that stops if they do, the buyout their partners can’t fund, the estate tax bill that wants cash from a balance sheet made of buildings and goodwill. CentraLife designs the insurance layer for all three — with your CPA and attorney, not around them.

Review My Structure (313) 925-3760

Pick the Problem

Three exposures. One design table.

The Person Who IS the Business

If one funeral would sink the company, the company is uninsured.

Every closely-held business has at least one person whose death would stop revenue cold — the founder who holds the relationships, the rainmaker who holds the pipeline, the operator who holds the whole thing together. Banks know it: key-person coverage is routinely a lending condition. Most owners find that out at the loan closing, not the planning table.

The key person insurance playbook

Partners · The Buyout Nobody Funded

Your buy-sell agreement is a promise to write a check. Where’s the check?

Most partnerships have the document — a buy-sell agreement that says when one owner dies, the survivors buy the shares at a set price. Far fewer have the funding. An unfunded buy-sell is a legal obligation to produce hundreds of thousands or millions of dollars, due on the death of the person whose absence just cut the company’s earnings — payable to a grieving spouse who is now, legally, your business partner.

The buy-sell funding playbook

Estate Liquidity · Trusts · Concentrated Wealth

The estate has plenty of value. The tax bill wants cash.

High-net-worth estates in Michigan share a shape: a business, real estate, retirement accounts — wealth that is real but illiquid. Estate settlement doesn’t take shares of the family company; it takes cash, on a deadline. Families without a liquidity plan sell assets fast and cheap to pay for the privilege of inheriting them.

The high-net-worth planning playbook

The Part the Industry Skips

Owners insure the truck, the building, the lawsuit — and skip the owner.

The general-liability policy renews every year without a thought. Meanwhile the buy-sell sits unfunded, the key-person coverage is whatever the bank required in 2019, and the owner’s own retirement is “the business is my retirement” — a plan that requires selling it, someday, to someone, at the right price. The design table covers all of it in one pass.

Key person coverage sized from your P&L — with the §101(j) paperwork that keeps the benefit tax-free
Buy-sell funding re-read against Connelly v. United States (2024) — before it costs seven figures
The owner’s own exit: max-funded cash value that grows outside the company’s risk

Run Your Own Numbers

Max-Funded IUL & the MEC Line

The design rules for the owner’s personal accumulation layer — no employer plan required.

Tax-Free Retirement Calculator

What your exit-income goal must gross from taxable vs tax-free sources.

Trust & Estate Planning

ILITs, SLATs, and the structures that keep the death benefit outside the taxable estate.

The Short Answer

How business owners actually use life insurance.

Business owners generally use life insurance for four distinct jobs, and each one has its own owner, beneficiary and tax treatment: key person coverage (the company owns a policy on the person revenue depends on), buy-sell funding (the money that actually pays for a deceased owner’s shares), executive benefits (a §162 bonus or informally funded deferred-compensation plan used as retention), and the owner’s personal accumulation and estate liquidity. Choosing the wrong owner for the policy is the expensive mistake — not choosing the wrong carrier.

The tax mechanics that decide the design: premiums are generally not deductible when the business is directly or indirectly a beneficiary (IRC §264); employer-owned death benefits are taxable above premiums paid unless the notice-and-consent requirements of IRC §101(j) were met before issue and Form 8925 is filed with the return; and in Connelly v. United States, 602 U.S. 257 (2024), the Supreme Court held unanimously that insurance proceeds a corporation receives to redeem a deceased shareholder’s stock are a corporate asset that increases the company’s value for estate-tax purposes, without an offsetting deduction for the redemption obligation. Redemption-style buy-sells written before 2024 should be re-read against that holding.

Sizing is a liquidity question, not a rule of thumb. For deaths in 2026 the federal basic exclusion amount is $15,000,000 per person (up from $13,990,000 in 2025) and the annual gift exclusion is $19,000 — the numbers that drive whether estate liquidity is the binding constraint and how trust premiums get funded. Below that line, illiquidity is still the problem: a concentrated, closely held estate is paid for in cash on a deadline. CentraLife designs the insurance layer with your CPA and attorney; nothing here is legal or tax advice, and every figure should be verified at irs.gov before you sign anything.

Structure by Structure

Who should own the policy, compared.

Key Person

Cross-Purchase Buy-Sell

Entity Redemption

ILIT-Owned Liquidity

Who owns the policy

The business

Each owner, on the others

The company

An irrevocable trust (ILIT)

Who receives the death benefit

The business

The surviving owners personally

The company

The trust, for the family

What the money is for

Replacing lost revenue, calming lenders, funding a search

Buying the deceased owner’s shares directly

The company redeems the shares

Estate settlement costs and equalizing heirs

Premiums deductible?

No — IRC §264

No (gifts to the trust use the $19,000 annual exclusion)

Death benefit income-taxable?

Tax-free only if §101(j) notice/consent was met before issue and Form 8925 is filed

Generally income-tax-free — IRC §101(a)

Same §101(j) requirement applies

Generally income-tax-free — IRC §101(a)

Effect on the estate

Raises company value if proceeds stay in the company

Proceeds sit outside the company; buyers get basis step-up in the purchased shares

Connelly (2024): proceeds increase the company’s value for estate tax

Kept outside the taxable estate if the trust buys the policy (watch the 3-year rule, IRC §2035)

Main caveat

Paperwork fails quietly — consent must pre-date issue

Policy count grows fast with many owners (N×(N–1))

Simplest to administer, most exposed post-Connelly

Irrevocable — sizing and drafting come before signatures

2026 figures from the IRS inflation-adjustment release. Structure is decided with your CPA and attorney; this table is educational and not legal or tax advice.

Asked Across the Desk

Business coverage — the honest answers.

Four families of work: key person coverage (company-owned protection on the people revenue depends on), buy-sell funding (cross-purchase and post-Connelly redemption designs), executive benefits (§162 bonus plans and informally-funded deferred compensation as golden handcuffs), and owner personal planning — the max-funded cash-value designs that build the owner’s own retirement outside the business. Most engagements touch more than one.

Primary Sources

Reviewed and fact-checked 2026-09-08 by CentraLife (Mike Hamade). Educational information only — not legal, tax, or individualized financial advice. Tax law and IRS figures change; verify current amounts at irs.gov and confirm structure with your own CPA and attorney before acting.

Bring the buy-sell. We’ll bring the math.

A licensed advisor reviews what you have — agreements, in-force policies, the lender requirements — and shows you what’s funded, what isn’t, and what it costs to fix. No cost, no obligation.

Schedule the Review (313) 925-3760