Case Study Series: Turbo-Charged Split-Dollar


“The customizable nature of private SDAs allows highly-illiquid clients to obtain needed life insurance coverage on a sustainable, long-term basis, even if they have minimal federal gift and GST tax exemptions to pay premiums. For example, a trust-to-trust SDA approach may be used where an existing trust, rather than the grantor, lends premium amounts to the ILIT. This “turbo-charged” approach (1) allows the client to leverage liquidity in an existing plan to provide for needed life insurance coverage without adversely impacting his or her personal liquidity or remaining transfer tax exemptions and (2) keeps both the life insurance death benefits and the value of the SDA receivable out of the grantor’s estate under general estate tax principles.”

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