A Split Dollar Plan is a type of benefit plan for executives and business owners which establishes a life insurance contract so that the premium is paid by the corporation and the executive receives much of the stated death benefits. Typically the corporation retains all rights to the cash value and will be completely repaid all premiums in the event of premature death. The executive can name the beneficiaries of the "excess" death benefits,and in some cases at retirement; the executive can be in receipt of the full policy and be able to access the accumulated cash values on a tax-favored basis. Good planning must be done to determine how best to deal with taxation issues primarily for the participant.

Plan Advantages

• The initial costs of the death benefits for the executive are extraordinarily low.
• The premiums are paid by the employer, and if death occurs pre- retirement, then the employer's death proceeds will pay back all premiums.
• Employer death benefits can provide for some portion of key-man coverage.

Plan Disadvantages

• Participants will be taxed on the costs of the death benefits excess of the premiums paid and can become very expensive post retirement.
• There are additional reporting requirements.