G—Cross Purchase Funded with a Split Dollar Agreement

Split-dollar insurance is not limited to merely funding the personal insurance needs of an employee. For example, the employee could choose to enter into a split-dollar agreement insuring someone other than himself, such as a spouse or a child. Alternatively, the employee could choose to enter into a split-dollar agreement insuring another stockholder whose stock he is obligated to purchase.

DURING LIFETIME. Assume that we have a corporation owned by two individuals, Employee A and Employee B. They enter into a cross-purchase agreement providing for the purchase and sale of their respective interests. This business funded strategy should not be confused with the
cross endorsement buy-sell agreement.

The corporation purchases and owns a permanent life insurance policy insuring the life of each employee. In order to fund their mutual obligations to each other, A and B enter into splitdollar agreements with the corporation providing for the allocation of premiums, cash values and death benefits. In contrast to the typical employer/employee split-dollar plan that provides death benefits for the insured’s personal beneficiary, these agreements provide for A to receive the
death proceeds from the policy insuring B, and for B to receive the death proceeds from the policy insuring A.