Asked by: Vanda Lilienthal
asked in category: General Last Updated: 15th March, 2020

Who pays the premiums in a split dollar plan?

With a classic split-dollar plan, the employer pays some of the premium (the part that is equal to cash value), while the employee pays the rest. If the employees dies, or the plan is terminated, the surrender cash value is paid to the company, and the death benefits are paid out to beneficiaries.

Click to see full answer.


Similarly one may ask, how does split dollar insurance work?

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.

Likewise, who is the owner of the policy and who pays the premium in an executive bonus plan? In a “Single Bonus” design, the executive is responsible for paying the taxes on the premium amounts paid (either directly or indirectly) by the employer. In a “Double Bonus” design, the employer pays the premium amount, and provides a cash sum to the executive to cover the tax on the premium amount.

Furthermore, how is split dollar life insurance taxed?

In a typical split-dollar agreement, the employer pays all or most of the policy premiums in exchange for an interest in the policy cash value and death benefit. If done properly, this removes the life insurance proceeds from the employee's gross estate for federal estate tax purposes.

What is endorsement split dollar?

Under an endorsement split dollar arrangement, the business purchases an insurance policy on the life of a key employee. The employee then names the beneficiary while the company retains ownership of the policy and pays the premiums. The employee is taxed on the fair market value of the life insurance policy.

30 Related Question Answers Found

What is a split dollar collateral assignment?

Is a split dollar plan a qualified plan?

What is considered an advantage of a cross purchase plan?


What is a split dollar annuity?

What is a split life insurance policy?

In which type of insurance policy is the premium split between an employer and the person being insured?


What type of life insurance do I need for a Buy Sell Agreement?

How does a collateral assignment work?

Is life insurance deductible for S Corp?


Are life insurance premiums deductible?

When may a business deduct the premiums it pays for an employee's life insurance benefit?

Is life insurance a business expense?


What is ps58?

What is a whole life insurance policy?