38. Using a Trustee in a Buy-Sell Agreement

Sometimes there are advantages in setting up the buy-sell arrangement with a trustee. This assures that the agreement will be carried out as planned. A disinterested individual can be the trustee, but more often it
will be advantageous to use a professional, corporate trustee and avoid the problems of an individual trustee dying before a stockholder does, and the pressures that might be brought on an individual to which a corporate trustee would not be subject.

If you use a trustee, however, make sure the trust is in existence before naming the trustee the beneficiary of the policies. That means the agreement should be executed, the trust created, and the trustee designated. The trustee does not exist prior to the creation of the trust, so if the trustee is named beneficiary before the trust is set up, a nonexisting person would be named and the beneficiary designation would have no effect.

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