COLI — Corporate-Owned Life Insurance
Permanent life insurance owned by the business — used to fund NQDC, key-person, buy-sell, and as a tax-advantaged 'corporate savings account.'
What it does
The business pays premium on a permanent (whole or universal) policy on a key employee or owner. Cash value grows tax-deferred on the corporate balance sheet, can be borrowed against tax-free for opportunistic uses, and pays out income-tax-free at death.
Triple-duty design
The same dollar can simultaneously: (1) fund the buy-sell, (2) provide key-person protection, and (3) informally fund NQDC for the same executive. The cash value compounds while doing all three.
Notice and consent
Post-2006, COLI requires written employee consent BEFORE the policy is issued and annual reporting (Form 8925) — otherwise the death benefit becomes taxable.
Educational only — not tax, legal, or investment advice. Talk through your specific situation with a qualified advisor.