Split Dollar Life Insurance
A individual might be thinking that this is protection plan product. However, it is a way of paying for protection plan. Generally, the cost of insurance policy could be not affordable, especially when the protection is extensive.
Split Dollar Life Insurance
This is a sure way to make insurance policy more affordable by sharing the outlay of the plan, or the top quality between more than one party. In many instances, it is usually between an organization and worker.
For instance, an organization could wish to provide good things about some workers. For workers who are old, protection for insurance policy could be relatively expensive; hence, the organization could be willing to pay the cash-value aspect of the top quality, while those workers pay the protection aspect only.
Split dollar life insurance taxation
This is comfortable for the staff member, knowing that is family is provided for. In addition, the goal of encouraging the staff member is achieved. When the covered individual passes away, advantages of the plan are refunded to the organization for its top quality efforts and the rest goes to the recipients.
This is a sure way of saving money life insurance policy protection, since it does not give space for misunderstandings in relation to the possession of the plan.
Collateral assignment split dollar life insurance
There are three main ways on how the split-dollar life insurance policy protection is handled.
1. The first one is where the possession of the plan is in the hands of the insured individual. The legal documents in this situation will show that an element of the advantages from holder’s loss of life is given to the organization and what is left is paid to the respective recipients.
Private split dollar life insurance
If the staff member does not work for the organization anymore, there is repayment of all efforts from the money value of the plan and the original contract is demolished.
2. The second is the security contract. This is where the staff member owns the plan and the organization pays an element of the rates. According to this insurance policy plan, the organization’s contribution is handled as a zero-interest loan, which is due at the loss of life of the staff member. The organization is repaid the equivalent of his or her efforts.
3. The third is the endorsement method. The plan is bought by the organization and hence becomes the owner. In this situation, the staff member is the named beneficiary of the plan. However, the submission of the advantages has a separate contract.
Split dollar life insurance estate planning
For these expenses, there is no tax exceptions for the rates paid. The organization can howeve, include the rates as expenses, and can be subtracted from pre-tax profits. The final expenses and loss of life advantages are both tax-free.
Article Source: Split Dollar Life Insurance. For more information visit www.irs.gov/businesses/corporations/split-dollar-life-insurance-audit-technique-guide-03-2005 here.