Split-Dollar Life Insurance
Description
How to fill out Split-Dollar Life Insurance?
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FAQ
The endorsement split dollar plan is one that is owned by the employer. The premiums are paid by the employer and the beneficiary is listed as the employee.
In a split-dollar plan, an employer and employee execute a written agreement that outlines how they will share the premium cost, cash value, and death benefit of a permanent life insurance policy.Split-dollar plans also require record-keeping and annual tax reporting.
A split-dollar policy is not an insurance policy but refers to a contract between the parties that sets out their duties to split the costs and their rights to share in the proceeds of an insurance policy.
What is Employer Provided Life insurance? Employer provided life insurance is an arrangement where, the employer buys the life insurance plan and pays the premium for the benefit of the employee.Furthermore, the life insurance proceeds to the employee are tax free u/s 10(10D).
Under a collateral assignment split dollar arrangement, the business loans a key employee money to pay the premium on a life insurance policy.He or she owns the policy and has the ability to name the beneficiary, and is taxed on the interest-free element of the loan.
In a split-dollar plan, an employer and employee execute a written agreement that outlines how they will share the premium cost, cash value, and death benefit of a permanent life insurance policy.Generally, the owner of the policy, with some exceptions, is also the owner for tax purposes.
Funding a split dollar plan is a way to reward a key employee while accruing cash value in a whole life insurance policy that can serve as a ready source of funding for the employer. This funding can be used for a future buyout or even a deferred compensation plan.