Split dollar Insurance refers not to a type of policy, but a method of paying for the policy. There are three elements of a permanent insurance policy which can be split; namely, the ownership, the beneficiary, and the premium. The following shows a few basic options when setting up a split-dollar arrangement:

A. Ownership
B. Beneficiary
C. Premium Payer

The diagram below illustrates a very basic variety of Split Dollar plan which can be modified to meet the needs of both employer and employee.

Uses of Split-Dollar

The IRS has contended in one situation that cash value build up in excess of the premiums paid may also be current income to the taxpayer. Technical Advice Memorandum LTR 9604001, Sept. 8, 1995

This document was last modified on July 15, 1999

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