Split-Dollar Life Insurance

The term “split-dollar” describes the method of paying for life insurance (whether whole, universal, or variable) by splitting the premiums and proceeds between an employer and an employee.

Split-dollar payment arrangements generally may take two forms:

•  The employer pays the premiums and owns the contract. The employer receives reimbursement of the premiums upon the employee’s death, and the employee’s beneficiary then receives the balance of the insurance proceeds.

•  The employer pays the premiums, but the employee owns the contract. The premiums are then repaid to the employer out of the insurance proceeds.

The primary differences between these two arrangements are differing tax consequences based on the ownership of the contract.


