FAQ Friday: Supreme Court Decision
On Friday, June 6, 2025, Attorney, Steven Berger discusses the recent Supreme Court decision.
The case name is Connelly vs. The United States and it was decided in 2024. It has to do with buy-sell agreements. Traditional buy-sell are to fund with life insurance that the business owns. This way when one person dies, the business gets the money and can then buy out the deceased person’s family’s stock so that the remaining owners become owners with the higher percentages.
The big change from this supreme court case is that insurance proceeds upon death are added to the value of the company. In the past, there could be a $6B company with 3 owners, the family of the owner who passed would receive $2B and the remaining 2 owners would now each own 50% instead of 1/3.
Since this supreme court decision, in the above scenario, the company after the owner’s passing would be worth $6B + $2B and so the family would need to be paid $2.6B to me made whole. If the other two owners can’t come up with the additional money, then they will be joint owners with the decedent’s family.
There is a reason the Trust’s we prepare for our client’s are so detailed is so there are protections for our clients. It’s very important to follow through on your obligations such as beneficiary designations and funding your trust and also making all updates upon a death of a grantor.
Best laid plans may not occur if these steps aren’t taken.
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