What is “split dollar life insurance” and “reverse split dollar life insurance”?
Split-dollar life insurance is actually not life insurance at all, but a method of purchasing the insurance. Employment related split-dollar insurance involves the participation of an employer and employee, in which the parties agree to a sharing of the costs and benefits of the insurance on the employee. Typically, the employer agrees to advance all or some portion of the premium, in order to provide insurance for the heirs of the employee. The employer will be reimbursed its advances from the proceeds of the insurance upon the death of the employee (or from the cash value, if the policy is terminated early). The basic form provides for the death benefit to be owned by the heirs of the insured employee, subject to an obligation to reimburse the employer for its premium advances that is secured by policy cash values. The tax consequences to the parties were initially outlined in Revenue Ruling 64-3281 and have been the subject of numerous rulings and court decisions. In essence, the IR
