Business Life Insurance Beneficiary Mistake #1

The most common business life insurance beneficiary mistake involves key-person life insurance policies. Business owners often attempt to deduct premiums paid by the business for the key-person life insurance policy. He or she has not consulted a tax professional but a friend or neighbor instead. By deducting the premiums, the death benefit now becomes taxable to the business. Does it really make sense to take a tax deduction on a $5000 premium and then pay taxes on a $1,000,000 lump sum? Luckily the fix is easy: businesses should not deduct the key-person life insurance premiums as an expense. The death benefit will pass tax free as intended to the business to compensate for the loss of the key-person.