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Termination Death Benefit for Large Corporations: How Not to Lose Benefits to Taxes, While Insuring Recovery of Accrued Liabilities

It is a hard, somewhat morbid, topic to face, but the death of business executives at large companies is a financially fraught time for both the company and family of the executive alike. The financial payout of termination benefits  at the death of an executive is taxed heavily, usually leaving between 30-35% of benefits after estate and income taxes to their heirs.

Having spent a lifetime analyzing such situations and dealing with them first hand, I can definitively say that I’ve found a better way for all parties to plan for such difficult moments. To first test my theory, I spent a number of months searching through the proxy statements of large corporations who have had executives die while employed. I calculated how much the company paid out in “death benefits” (salary, incentive bonuses, stock options, etc.) that were promised to the employee and now passed on to their estate. In most every case, the company paid large amounts, which were then taxed through the roof leaving only a small portion of what was promised. 

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