Final answer:
The life insurance policy in a Buy-Sell Agreement benefits the surviving partner only, enabling them to purchase the deceased partner's share, thereby ensuring the business's continuity.
Step-by-step explanation:
In the scenario provided, where two partners own equal shares in a business that's worth $1,000,000 and are contributing to a life insurance policy to fund a Buy-Sell Agreement, the correct answer would be: a) The life insurance policy benefits the surviving partner only. This type of agreement is put in place to ensure that if one partner passes away, the surviving partner can purchase the deceased partner's interest without legal complications. The proceeds from the life insurance policy go directly to the surviving partner, allowing them to buy out the deceased partner's share of the business, thus providing a smooth transition of ownership. The family of the deceased partner typically receives the value of the share from the surviving partner, not directly from the insurance policy. This setup protects the business's continuity while also assuring the deceased partner's family is compensated.