A private split dollar arrangement is an agreement between two parties to share the costs and benefits of a life insurance policy. A PSD arrangement does not involve compensation and is not related to employment. In fact, it is most often used in family situations where one family member has a need for life insurance and another family member has the money and willingness to pay the premiums. Often, a parent or grandparent acts as both the premium payor and the insured while the children, grandchildren or an ILIT for their benefit are usually the policy owner and beneficiary.
In a PSD arrangement, the ILIT or child purchases the policy, and the parent or grandparent pays the premiums and is entitled to recover the greater of the policy’s cash value or the total premiums advanced when the arrangement terminates. Termination can occur at the insured’s death or at any other time specified in the PSD arrangement. If the insured dies while the arrangement is still in place, death benefits are first used to repay the premium payor the greater of cash values or premiums advanced. The remaining death benefits are paid to the policy beneficiary.
Our Private Split Dollar toolkit includes:
Producer Guide to Private Split Dollar Arrangements
Q&A: Use of One-Year Term Product Rates in Split Dollar Arrangements
Client Guide to Private Split Dollar Arrangements
PSD in a Nutshell: Steps for Implementing a Private Split Dollar Arrangement
Private Split Dollar Client Presentation
If you would like to discuss a case with our advanced markets experts, call (800) 936 - 0339 option 1. Scroll down to view the toolkit.
Producer Guide to Private Split Dollar Arrangements
Q&A: Use of One-Year Term Product Rates in Split Dollar Arrangements
