How do cross-purchase and entity redemption plans differ in the calculator?
In a cross-purchase plan each owner insures every other owner, so the calculator shows n × (n − 1) policies, each covering the deceased's share divided among survivors. In an entity redemption plan the business owns one policy per owner, so it shows n policies, each equal to one owner's full share.
For a $3,000,000 business with three equal owners, each share is $1,000,000. Cross-purchase needs six policies of $500,000; entity redemption needs three policies of $1,000,000. Total coverage is the same; administration and tax treatment are not.
The definitions explain the trade-offs: cross-purchase gives surviving owners a higher cost basis in the shares they buy, while entity redemption centralizes premiums but provides no basis increase. They also note that the Supreme Court's 2024 decision in Connelly v. United States held that corporate-owned life insurance proceeds can increase a company's value for estate tax purposes.