Buy-sell agreement funding calculator
Shows how many life insurance policies a cross-purchase or entity-redemption buy-sell plan needs, and the face amount of each, for up to six owners.
Runs entirely in your browser: nothing you enter is sent or stored by this site. Results are estimates for planning, not a quote or advice.
The calculator answers one question: when an owner dies, how much life insurance has to be in place, and on whom, so the survivors can pay the estate without borrowing? It compares the two usual structures, a cross-purchase plan, where the owners buy policies on each other, and an entity redemption plan, where the company buys a policy on each owner.
How to use it
- Value of the business. Enter the figure your agreement's valuation clause produces today: a formula, the price the owners last signed, or a recent appraisal. If the agreement has no valuation method, fix that before you buy any insurance.
- Owners and ownership. Up to six rows, each with a name (optional) and a percentage. Take the percentages from your operating agreement, partnership agreement or stock ledger. A row with no percentage is ignored, and the tool needs two owners before it shows anything.
The widget opens with a $3,000,000 business and three owners at 50%, 30% and 20%. Those are examples.
The math
Each owner's share is the business value times that owner's percentage.
Entity redemption. The company owns one policy on each owner, and each face amount equals that owner's share. Three owners need three policies.
Cross-purchase. Every owner holds a policy on every other owner, so n owners need n × (n − 1) policies. When one owner dies, the survivors split the purchase in proportion to what they hold. The face amount of owner J's policy on owner I is:
value × I's percentage × J's percentage ÷ (total percentage − I's percentage)
A hypothetical example, using the opening numbers: A's share is worth $1,500,000, B's $900,000 and C's $600,000.
| If this owner dies | A buys | B buys | C buys |
|---|---|---|---|
| A | — | $900,000 | $600,000 |
| B | $642,857 | — | $257,143 |
| C | $375,000 | $225,000 | — |
B's policy on A is $1,500,000 × 30 ÷ (100 − 50) = $900,000. The cross-purchase plan takes six policies; entity redemption takes three, at $1.5 million, $900,000 and $600,000. Down each column, A ends up owning $1,017,857 of coverage, B $1,125,000 and C $857,143.
The large number at the top of the results adds every owner's share together ($3,000,000 here). It is not what any one death requires. Read the tables for that.
Assumptions and limits
- Insurance pays for 100% of the deceased owner's share at the value you typed. Disability, retirement, divorce, bankruptcy and a departing owner are common buy-sell triggers, and none are modeled.
- There are no premiums in the tool. Cost turns on each owner's age and health, and in a cross-purchase plan the owner who is cheapest to insure may end up paying for coverage on the oldest. Ask a broker for illustrations on each owner.
- If the percentages do not total 100%, the tool warns you and assumes the listed owners buy in proportion to their own shares.
- A value goes stale. Many agreements require a fresh valuation each year, and the face amounts here need to follow it.
- Taxes are not calculated. Moving an existing policy between owners or into the company can run into the transfer-for-value rule, so ask a CPA first. A trusteed cross-purchase arrangement or an insurance LLC holds one policy per owner, which cuts the policy count to n while keeping cross-purchase tax treatment.
- Entity redemption deserves an estate attorney's review. In Connelly v. United States (2024), the Supreme Court held that life insurance a corporation receives to redeem a deceased owner's shares counts toward the company's value for estate tax, with no offset for the obligation to redeem.
- Insurers underwrite each owner and will want to see why the amount fits. Nothing here tests insurability.
Read Funding a buy-sell agreement with life insurance after Connelly and cross-purchase vs entity redemption buy-sell plans for how the plans work in practice, business succession planning and the insurance that funds it for the larger picture, and use the key person insurance calculator if the business also depends on one person. The glossary entries for a buy-sell agreement, a cross-purchase agreement and an entity redemption define the terms.
Last reviewed October 10, 2026