{"id":953,"date":"2025-04-17T17:17:43","date_gmt":"2025-04-17T17:17:43","guid":{"rendered":"https:\/\/staging8.dynaserverx.com\/newenglandtrust.com\/?post_type=articles&#038;p=953"},"modified":"2025-04-17T17:17:43","modified_gmt":"2025-04-17T17:17:43","slug":"what-is-split-dollar-life-insurance","status":"publish","type":"articles","link":"https:\/\/staging8.dynaserverx.com\/newenglandtrust.com\/articles\/what-is-split-dollar-life-insurance\/","title":{"rendered":"What Is Split-Dollar Life Insurance?"},"content":{"rendered":"<p>Life insurance can be an important part of a business owner\u2019s financial strategy. It can also be a great benefit to offer to key employees. However, sometimes the cost can be prohibitive. With split-dollar life insurance, the cost of life insurance can be managed by splitting it up.<\/p>\n<p>To be clear, split-dollar life insurance is not an insurance product but rather an arrangement to purchase and fund life insurance between two parties, generally an employee and an employer.<\/p>\n<p>Basically, an agreement is made under which a life insurance policy is purchased on an individual. The employer will pay all or a portion of the premiums on the policy, depending on the arrangement. When the individual dies, the employer receives a portion of the death benefit equal to the amount paid in premiums. The remaining benefit goes to the individual\u2019s beneficiaries.<\/p>\n<p>For example, if a $200,000 policy were purchased for an individual who died after the employer had paid $28,000 in premiums, then the employer would get back the money it had paid in premiums and $172,000 would go to the insured individual\u2019s beneficiaries.<\/p>\n<p>This agreement is attractive to both parties because the employer recoups its money and the employee receives a life insurance policy at a better rate because the company is picking up all or a portion of the cost. The death benefit is free of income tax for both parties as well.<\/p>\n<p>A split-dollar life insurance arrangement can be used for a variety of reasons.<\/p>\n<ul>\n<li>It can be used to fund a buy-sell agreement.<\/li>\n<li>It can help recruit and retain quality executives.<\/li>\n<li>Business owners who might not otherwise be able to afford life insurance might benefit from a split-dollar arrangement.<\/li>\n<\/ul>\n<p>Split-dollar life insurance policies can be set up in different ways. Usually, the individual owns the policy and designates beneficiaries, then by absolute assignment transfers to the employer an amount equal to the premiums paid by the employer. In this case, the individual retains all ownership rights, but when the individual dies, the employer is reimbursed before the individual\u2019s named beneficiaries are paid. If the individual leaves the company, any cash value in the policy would be used to repay the company.<\/p>\n<p>In other arrangements, the policy can be purchased by the employee and assigned to the employer as collateral in exchange for the employer paying the premiums. Because the company holds the policy as collateral, it can be confident that it will recoup the money spent on the insurance premiums.<\/p>\n<p>In some cases, the employer can take out a life insurance policy on the employee. The employer names itself as a beneficiary of an amount equal to the cash value and designates that any funds in excess of that amount will be paid to the individual\u2019s beneficiaries.<\/p>\n<p>The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.<\/p>\n<p>As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have contract limitations, fees, and charges, which can include mortality and expense charges. In addition, if a policy is surrendered early, there may be surrender charges and income tax obligations.<\/p>\n<p>&nbsp;<\/p>\n<p>The information in this newsletter is not intended as tax, legal, investment, or retirement advice or recommendations, and it may not be relied on for the \u00adpurpose of \u00adavoiding any \u00adfederal tax penalties. You are encouraged to seek guidance from an independent tax or legal professional. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the \u00adpurchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. \u00a9 2025 Broadridge Financial Solutions, Inc.<\/p>\n","protected":false},"featured_media":954,"template":"","meta":{"_acf_changed":false},"article-category":[20],"class_list":["post-953","articles","type-articles","status-publish","has-post-thumbnail","hentry","article-category-risk-management"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.3.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is Split-Dollar Life Insurance? - New England Trust<\/title>\n<meta name=\"description\" content=\"In Evanston, IL, Robard Flaremoor offers Financial Planning Services &amp; Financial Advice. \u2018Financial Services\u2019 from College Funding to Wealth Protection. \u2018Tax Services\u2019 include Tax Preparation, Tax Reduction, and Tax Management\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/staging8.dynaserverx.com\/newenglandtrust.com\/articles\/what-is-split-dollar-life-insurance\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What Is Split-Dollar Life Insurance? 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