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💰 '''Split-dollar life insurance''' is an arrangement — primarily used in the United States — in which the costs, ownership rights, and [[Definition:Death benefit | death-benefit]] proceeds of a [[Definition:Life insurance | life insurance]] policy are divided between two parties, typically an employer and an employee (or a trust established for the employee's benefit). Rather than constituting a distinct policy type, split-dollar is a funding and benefit-sharing mechanism layered on top of a standard [[Definition:Whole life insurance | whole]] or [[Definition:Universal life insurance | universal life]] contract. It has long served as an executive [[Definition:Compensation and benefits | compensation]] tool, offering tax-advantaged wealth transfer and supplemental retirement benefits in ways that other arrangements cannot easily replicate.

🔧 Two principal structures dominate. Under the endorsement method, the employer owns the policy and endorses a portion of the death benefit to the employee's beneficiary; the employee is taxed on the economic benefit — essentially the cost of the insurance protection received — as measured by IRS-prescribed term rates or the insurer's alternative published rates. Under the collateral-assignment method, the employee (or an irrevocable [[Definition:Life insurance trust | life insurance trust]]) owns the policy, and the employer's premium contributions are treated as loans; the employer's interest is secured by a collateral assignment of the policy's [[Definition:Cash value | cash value]] and death benefit up to the loan balance. IRS regulations issued in 2003 (Treasury Regulations §1.61-22 and §1.7872-15) formalized the tax treatment of both structures and curtailed some aggressive planning techniques that had flourished previously. These rules dictate whether the arrangement is treated as a "compensatory" or "loan" regime, with materially different income-tax, gift-tax, and estate-tax consequences.

📋 For [[Definition:Insurance carrier | life insurers]] and their [[Definition:Distribution channel | distribution partners]], split-dollar arrangements represent a high-value planning niche that generates substantial [[Definition:Premium | premium]] volume — policies funding these arrangements often carry large face amounts and significant [[Definition:Cash value | cash-value]] accumulation. Designing and administering split-dollar plans requires close collaboration between insurers' advanced-markets units, tax counsel, and the client's advisors. Regulatory and tax complexity means the market is concentrated among carriers with strong advanced-planning support and among [[Definition:Broker | brokers]] and agents who specialize in executive benefits. While split-dollar is overwhelmingly a U.S. phenomenon shaped by the Internal Revenue Code, conceptually analogous employer-funded life insurance arrangements exist in other jurisdictions — though they operate under entirely different tax and employment-law frameworks and are not generally referred to as "split-dollar."

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Life insurance]]
* [[Definition:Universal life insurance]]
* [[Definition:Whole life insurance]]
* [[Definition:Cash value]]
* [[Definition:Executive benefits]]
* [[Definition:Estate planning]]
{{Div col end}}

Definition:Split-dollar life insurance - Revision history

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