F—Split-Dollar Insurance

Split-dollar insurance is an agreement between two parties to allocate between them the costs and benefits of a life insurance policy. It is not a particular type of life insurance policy. When adopted by an employer split-dollar insurance allows the employer to provide valuable life insurance protection for selected employees.

Split-dollar insurance can be provided for the employees of a corporation, a partnership, or a sole proprietorship. Split-dollar is generally not appropriate for partners or employee-stockholders of S corporations because of the pass-through nature of taxation (except to reallocate premiums among owners and when used with a life insurance trust to reduce the value of gifts to the trust). In contrast, private split dollar involves an agreement between individuals,
or between an individual and a trust.