Can a Life Settlement transaction be used to unwind an executive split dollar plan?
Yes. Split dollar life insurance is typically purchased for the benefit of a key business executive or owner, to provide cash flow for the executive when he or she retires. In the past, if the executive either sold the company or prematurely left the company prior to the “crossover” point in the insurance contract, the policy had little or no value to the company and was considered an “illiquid” asset on the company’s balance sheet. With Life Settlements, companies can receive a valuation of the life insurance policy and potentially sell it for more than the cash surrender value.
