Split-Dollar Insurance

Description:  The reason split-dollar insurance is so effective and useful is because it has a few different formats, so you can use the one that best suits your situation.

There are MULTIPLE ways split-dollar insurance can be used, with the most common being the endorsement method, collateral assignment method, and the usual arrangement.

In the endorsement method, the business technically owns the life insurance policy and the employee assists in the payment of the premiums. Through this method, the business is typically the recipient of the cash value at the time of death, and the beneficiaries receive the balance.

In the collateral assignment method, the employee owns the life insurance policy and places it on collateral in return for financial contributions from the employer. At the time of death, the employer is repaid his contributions to the policy and the beneficiaries receive the balance.

The usual arrangement is very similar to the collateral assignment method. However, rather than using the policy as collateral to negotiate financial assistance, a portion of the policy is sold to the employer, with the portion size depending on the amount of employer’s financial assistance.

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Ready to take advantage of Split-Dollar Insurance? Get a Free Consultation from the Most Trusted and Risk Free Advisors in the Market - LotusGroup Advisors. With millions in under management and a Raving Fan Guarantee, You Can’t Go Wrong!

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Technorati Tags: beneficiaries, Collateral Assignment Method, Endorsement Method, policy ownership, Split-Dollar Insurance, Tax Premiums, Usual Arrangement

Description: The most common use for split-dollar insurance is for transfer of assets between generations, but it can used for far more situations.

In a previous post, we summarized the most common use of split-dollar insurance. However, there are many more situations in which split-dollar insurance can be used to minimize tax penalties. For example, split-dollar insurance can be effective:

• As a benefit to favor a specific employee or co-owner by helping the individual obtain coverage to protect their families.

• As a benefit for certain employees who might not be able to afford life insurance without financial support from their business.

• As a funding tool for salary continuation or deferred compensation in which the employee won’t receive his or her salary raise till a later date, such as retirement.

• As a method for buy-sell agreements, especially when there are large age discrepancies between the parties.

Split-dolar insurance’s versatility allows all of these scenarios to be covered by this one arrangement.

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Ready to take advantage of Split-Dollar Insurance? Get a Free Consultation from the Most Trusted and Risk Free Advisors in the Market - LotusGroup Advisors. With millions in under management and a Raving Fan Guarantee, You Can’t Go Wrong!

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Technorati Tags: benefits, buy-sell agreements, deferred compensation, Life Insurance, salary continuation, Split-Dollar Insurance, tax penalties, Versatility

Description: Split-dollar insurance allows family properties to be inherited by children with minimal, if any, additional taxes.

Split-dollar insurance is an arrangement between the policy owner and another party, such as a trust or a business, to split the costs and benefits of a permanent life insurance policy. Often, the arrangement is used by wealthy families looking to transfer ownership of their properties to the next generation.

According to the law, a couple can gift approximately $26,000 annually to a child, with a lifetime maximum limit of $1 million, tax-free. However, the properties and assets owned by the parents sometimes exceed the $1 million limit, so the children have to pay taxes on the properties, and if there is no cash and children aren’t wealthy, the assets have to be sold in order to pay the taxes.

However, if the parents are approaching senior citizenship or have maxed out their lifetime exclusion, the premiums can be higher than the amount they can provide annually tax-free to their children, putting the children in a tough spot financially.

Through the use of split-dollar insurance, the parents can split the responsibility of paying for the premiums with their children by placing the permanent life insurance plan in an insurance trust. This way, the financial burden on the children is lowered without any requirements for sacrifices in their inheritance.

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Ready to take advantage of Split-Dollar Insurance? Get a Free Consultation from the Most Trusted and Risk Free Advisors in the Market - LotusGroup Advisors. With millions in under management and a Raving Fan Guarantee, You Can’t Go Wrong!

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Technorati Tags: assets, inheritance, Split Responsibility, Split-Dollar Insurance, Tax Premiums, tax-free gifts, transfer ownership