Full Definition
Split-dollar life insurance is an arrangement in which two parties — typically an employer and employee, or a trust and individual — share the premium costs and/or benefits of a permanent life insurance policy. Under an endorsement split-dollar arrangement, the employer owns the policy and endorses a portion of the death benefit to the employee's beneficiary. Under a collateral assignment arrangement, the employee (or their trust) owns the policy and assigns a collateral interest to the employer equal to premiums paid. Split-dollar is used for executive benefits, key person retention, and estate planning. Economic benefit and loan regime taxation rules under IRC Section 7872 apply.
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