Spit
dollar life insurance is a highly effective estate planning technique for high
net worth individuals. It is essentially a strategy in which an individual can
utilize a series of separate annual loans in order to make premium payments for
his or her life insurance policies. This arrangement is also common for
employers who provide life insurance for highly compensated employees as a
supplemental benefit.
Split
dollar life insurance is especially useful for those individuals who would like
to have their life insurance policies owned in an irrevocable trust, yet do not
have the necessary annual exclusion amount available (currently $14,000 per
year per beneficiary) to pay the full premium amount.
The
strategy works as follows. Prior to the premium payment, an individual will
enter into a loan agreement with the irrevocable trust for the stated
applicable federal interest rate (AFR). This process will continue each year
until the death of the insured.
Upon the
insured’s death, the lending party will be paid off from the amount of the
death benefit. The remaining death benefit will pass to the irrevocable trust
or other designated beneficiaries tax-free.
If you
are an individual who would like to purchase additional life insurance or
believe that split dollar planning would be beneficial, please do not hesitate
to contact the Morris Law Group.
On the off chance that you have a family to deal with, this is a critical buy choice for you. free life insurance quotes
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