Endorsement Split-Dollar Life
Economic Benefit Regime
A Split Dollar plan allows a business to assist an employee with the purchase of needed personal life insurance by paying the premiums for the employee. The employer owns the policy and endorses a portion of the death benefit to the employee. The endorsed amount is typically equal to the death benefit, less the employer paid premiums. The employee is charged with the term cost of this death benefit, the so-called economic benefit cost. At some point in time (e.g., retirement) the employer may transfer the policy to the employee.
Employer Advantages:
- An effective method of attracting and retaining valuable employees
- May have access to the policy cash values
- Can be highly selective regarding which employees are covered
- Needs no IRS approval
Employee Advantages:
- Provides needed personal life insurance protection at a reduced current out-of-pocket cost
- Can be combined with a cross-purchase buy-sell agreement
