In a disability buy-sell agreement, the policies funding the agreement are owned by whom?

In a disability buy-sell agreement, the policies that fund the agreement are owned by the business entity itself. This is crucial because, in the event of a disability that impacts an owner's ability to contribute to the business, the buy-sell agreement ensures that the remaining owners or partners can purchase the disabled owner's share of the business.

Having the business entity own the policies aligns the funding mechanism directly with the business interests. This arrangement allows the business to receive the insurance proceeds in the event a disability claim is triggered, providing the necessary capital to buy the ownership interest of the disabled owner.

This setup avoids potential complications that could arise if the policies were owned personally by the individual owner or by other parties, like employees or financial institutions. The direct ownership by the business facilitates a smoother transaction and guarantees that the funds are immediately available for the buyout process.