Asked by: Vanda Lilienthalasked in category: General Last Updated: 15th March, 2020
Who pays the premiums in a split dollar plan?
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.