In a cross purchase buy-sell agreement, who owns the insurance policies?

In a cross purchase buy-sell agreement, the business owners are the ones who own the insurance policies. This arrangement involves each owner taking out a life insurance policy on the other owners. This means that if one owner passes away, the remaining owners can use the death benefit from the life insurance policy to purchase the deceased owner's share of the business.

This method ensures that the business ownership remains within the existing partners and provides a liquid asset to fund the purchase, preventing potential financial strain on the business itself. Additionally, this approach allows the surviving owners to maintain control over the business and ensures that the deceased owner’s family receives fair compensation for the ownership interest without becoming involved in the business operations.

Other options, such as the business corporation owning the policies or the deceased owner's family receiving the policies directly, do not align with the fundamental structure of a cross purchase agreement, where the emphasis is on the relationships and financial transactions among the current business owners.