In a disability buy-sell agreement, who owns the policies that fund the agreement?

In a disability buy-sell agreement, the policies that fund the agreement are typically owned by the business entity itself. This arrangement ensures that if a partner becomes disabled, the business has the necessary funds to buy the disabled partner's share of the business, thus providing financial security for both the remaining partners and the disabled partner’s estate.

When the business owns the policies, the premiums can generally be paid from the business's earnings, and any benefits received from the policy can be utilized directly by the business for the buyout. This setup is advantageous as it simplifies the process of transferring ownership of the business interest and aligns the financial responsibilities and benefits with the business entity involved.

Ownership by the individual partners or the beneficiaries would complicate matters in terms of tax implications and the management of policy payouts, while the insurance company is simply the provider of the coverage and does not have ownership over the policies within such agreements.