Steve Savant (Ash Brokerage) and Don Prehn (InsMark) have done it again with an excellent 6-minute video of the seven variations of an Executive Bonus Plan. One of the seven -- the Controlled Executive Bonus Plan -- is my personal favorite; however, the evaluation of all seven variations should be useful to you.
After you’ve reviewed Steve and Don’s video, click here for my Blog #26: Exceptional Benefits for Outstanding Executives to review in detail the material presented in their video.
Next, if you want to review details of my favorite, a Controlled Executive Bonus Plan for a non-shareholder key executive, click here for my Blog #43: Golden Handcuffs for Tom Hamilton. It is specifically designed to reward Tom, age 40, for remaining with the firm during these next few critical years while plans to sell the business are firming up. Tom will be paid a gross-up bonus in each of the next seven years to pay the seven scheduled $60,000 premiums on a personally-owned indexed universal life insurance policy with a face amount of $2,600,000. If Tom terminates employment anytime within the next seven years, the plan documentation has a provision that he owes the company an amount equal to the cumulative bonuses paid to date -- a serious inducement for him to stay employed. At the end of seven years, Tom no longer has any repayment liability.
Let me tempt you with Tom’s long-range benefits with the following graphic:
I believe the Controlled Executive Bonus Plan is far superior to Loan Regime Split Dollar which, up until now, has been my go-to plan for non-shareholder benefit plans for executives of closely-held companies. Click here for my rationale.
Important Note: Many of you are rightly concerned about the potential tax bomb in life insurance that can accidentally be triggered by a careless policyowner. Click here to read Blog #51: Avoiding the Tax Bomb in Life Insurance.
Plan Documents
The unusual documentation needed for a Controlled Executive Bonus Plan is available in Version 21.0 (and higher) of InsMark’s Documents On A Disk™ in the Key Employee Insurance Plans section of specimen documents.
InsMark’s Digital Workbook Files
If you would like some help creating customized versions of the presentations in this Blog for your clients, watch the video below on how to download and use InsMark’s Digital Workbook Files.
Digital Workbook Files For This Blog
Blog43.zip (We used the workbook from Blog 43 for this presentation)
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Licensing
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