“Split dollar life insurance arrangements remain an important tool for funding large life insurance purchases, especially in light of many validating private rulings and recent case law.  Private split dollar is a flexible, relatively conservative, and cost-effective tool for incorporating life insurance into a multi-purpose estate plan, which can provide family security, generate estate liquidity, and create a multi-generational legacy. It is particularly important for clients whose net worth is concentrated in illiquid assets, such as family or closely-held businesses, real estate, farms, etc.  These clients often need significant life insurance to generate liquidity to preserve their family legacy, but coverage may be limited if they just rely on annual exclusion gifts or gift tax exemptions to fund premiums.

“Private split dollar allows highly-illiquid clients to obtain needed life insurance coverage on a sustainable, long-term basis, without sole reliance on annual exclusion gifts and federal gift and GST tax exemptions to pay premiums. Post-implementation monitoring and pre-planning for an “exit” or termination of the arrangement, however, will be crucial to overall success of the approach”

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