Scrutinize Your Buy-Sell Agreements in the Wake of ‘Connelly’

The U.S. Supreme Court’s June 6, 2024 determination in Connelly v. United States, that a corporation’s life insurance policy held for redemption of a deceased shareholder’s stock increases its fair market value, will significantly affect many buy-sell agreements, many of which utilize life and disability insurance as the ideal funding mechanism for payment of the purchase price upon death, disability, or retirement.

In Connelly, two brothers who owned a roofing and building supply corporation entered into a buy-sell agreement to ensure that the business would stay in the family if one of them died — and one of ...