In an entity purchase agreement, who collects the death benefits?

In an entity purchase agreement, a designated trust typically serves as the entity that collects the death benefits from the life insurance policy. When the insured owner of a business passes away, the life insurance policy is in place to provide necessary funds to help facilitate the smooth transition of ownership. The trust is pre-established and designated within the purchase agreement to handle the proceeds, ensuring that the funds are used appropriately to buy out the deceased owner’s share according to the terms set forth.

By having a trust as the beneficiary, it helps isolate the benefits from the direct claims of heirs or other parties, thus simplifying the process of transferring ownership and utilizing the funds for their intended purpose, which is the buy-sell agreement. This mechanism helps protect the business continuity and ensures that surviving owners can maintain control without the complications that could arise from direct distributions to heirs.