Sue and Ellen are equal stockholders in a business valued at $6,000,000. The bus

Question

Sue and Ellen are equal stockholders in a business valued at $6,000,000. The business has purchased $3,000,000 life insurance policies on both women. If a stock redemption plan is established, which of the following would occur if Sue predeceases Ellen?

I.    Sue’s stock would pass to her estate.

II.   Sue’s life insurance proceeds would be paid to her estate.

III. The executor of Sue’s estate would transfer stock to the business, giving Ellen ownership of all outstanding voting stock.

a.

I only

b.

II only

c.

I and III

d.

II and III

a.

I only

b.

II only

c.

I and III

d.

II and III

Explanation / Answer

Answer -c (i) and (ii)

Both stock and life insurance would pass on to the estate. It cannot directly belong to Ellen since Ellen and Sue are equal (50%) owners

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