Split-Dollar Life Insurance
Split-dollar life insurance is an arrangement where costs and benefits of a life insurance policy are shared between two parties, often a business and an employee.
How this coverage works
Two parties agree in writing to split the premium, the cash value, and the death benefit of a single policy. The split can be structured several ways and the tax consequences follow the structure.
This is not a product you buy off a shelf. It is a legal arrangement built around a policy, and the arrangement is where all the risk and all the value sit.
Who this coverage may be good for
- Larger businesses.
- Advanced executive benefit planning where simpler structures have been ruled out.
What to consider before choosing it
- Requires professional legal and tax guidance. Do not attempt this from a website.
- Tax rules in this area are technical and have changed before.
- Exit and termination provisions matter as much as the entry.
Common questions
Is this right for a small business?
Usually not. An executive bonus arrangement accomplishes something similar with a fraction of the complexity. Complexity should have to earn its place.
Who owns the policy?
It depends on the structure. Both endorsement and collateral assignment arrangements exist and they allocate ownership differently.
How is it taxed?
Technically, and specifically to the structure. This is a question for a tax attorney before anything is signed.
Coverage availability, benefits, riders, and underwriting requirements vary by carrier, product, state, and individual eligibility. This page is for general educational purposes and is not a guarantee of coverage.