Characterisitcs of Split Dollar Plans

Split dollar plans for the purchase of life insurance are arrangements involving at least two parties in which a permanent life insurance policy is purchased.  The policy's premium and death benefits are split between the insured with the life insurance need and the party that is making the funds available to purchase the policy.  Although split dollar plans may be arranged between any two parties, the most common arrangement is the one between the insured employee and his or her employer.

Typically, in a split dollar plan, the following occur:

Policy premiums are split between the insured and the party with the resources.
Policy death benefits are split between the insured's personal beneficiary and the party paying the bulk of the premiums.

Cash values may be split between the two parties to the plan.