Key-Man/Exec Bonus

[Guest John14]

I have a little problem with what was to be a series of key-man policies. The group is an LLC with four partners. There are four term policies, one for each partner. Partners went to a tax lawyer and rewrote the operating agreement so a partner automatically loses his interest at death.

Currently set up with the Partners as the owners and the proceeds to be split 50/50 between the company and the deceased's estate with a collateral assignment to protect the company. My confusion is the dual purpose of the life insurance. Any ideas on the most efficient structure with the current policies and can someone suggest the proper taxation to the company and the partners for the intended purpose of the life insurance?