A Stay Bonus is an inducement to your key employees to remain with the company after your death to preserve the enterprise value of the business. It is a contract with your key employees that provides that they will receive a significant bonus in every paycheck for a two- or three-year period after your death if they stay with the company.
The Stay Bonus is funded with life insurance on your life. This life insurance is owned by an irrevocable life insurance trust that is earmarked to pay the bonus. Since the life insurance is owned by the life insurance trust, the insurance proceeds will not be subject to estate tax at your death.