Split Dollar Life Insurance Arrangements

Split-dollar life insurance plans provide a way for an employer to purchase life insurance as a fringe benefit for a key employee. They provide a valuable employee benefit at a relatively low long-term cost and incentivize the key executive to stay with your company.

• Outlay to purchase the life insurance policy;
• Policy ownership;
• Dividends;
• Death benefits;
• Cash value.

As a nonqualified plan, the employer is not required to offer this benefit to all employees. The employer can also modify or terminate the coverage if circumstances change.

Key considerations in the decision to set up a split-dollar plan for an employee include taxation (to the employer and the employee), ownership sharing, the timing of the outlays and what type of ownership the plan will have.