Split-Dollar Life Insurance

Joshua E. Husbands (Partner, Holland & Knight, Portland, Oregon) and J. Alan Jensen (Partner, Holland & Knight, Portland, Oregon) have recently published their article entitled Split-dollar Life Insurance Funding: You Mean People Still Do That?, Prob. & Prop., May/June 2008, at 40.

Here is an excerpt from their article:

After several torturous years of notices, reflection, meetings, and debate, the IRS issued final regulations for the taxation of split-dollar financed life insurance effective for agreements entered into after September 17, 2003. * * *

Despite the gloom and doom forecasted by many in the insurance industry and the legal profession, the final regulations did not sound the death knell for split-dollar planning.  Granted, some of the luster was gone from the heady days of collateral equity split-dollar arrangements using economic benefit measured by artificially low terms rates that had never actually seen the light of day in connection with the actual issuance of a real life insurance policy.  Nonetheless, in many instances the use of split-dollar arrangements still makes great sense and ca provide a very nice tax result for clients. * * *

This article analyzes the issues that should be raised with both older arrangements and those being put in place currently.