Glossary
Split-dollar arrangement
An agreement in which two parties, usually an employer and an executive or a company and its owner, divide a life insurance policy's premiums and benefits.
Also called: split-dollar life insurance, split dollar plan, endorsement split dollar, collateral assignment split dollar
A split-dollar arrangement is a contract between two parties that divides the costs and benefits of a permanent life insurance policy. The common pairing is an employer and a key executive. The employer advances most or all of the premium and takes back its outlay, or an agreed amount, from the cash value or death benefit, and the executive's beneficiary receives the rest. Family and trust arrangements use the same logic.
Tax treatment follows who owns the policy, under Treasury's 2003 final regulations. In the economic benefit regime (26 CFR 1.61-22), the owner is treated as giving the other party the value of the coverage each year, and that party reports it as income. In the loan regime (26 CFR 1.7872-15), the party paying the premium is treated as lending to the owner, and the below-market-loan interest rules apply. Which regime governs depends on ownership and on who holds rights to the cash value, so the paperwork has to match the deal.
Documentation is the usual weak point: an unsigned or vague agreement invites the IRS to recharacterize it. If the employer is the beneficiary on a policy covering an employee, the notice-and-consent rules of IRC 101(j) under corporate-owned life insurance can apply as well. Take the design to a CPA or attorney. The guide on split-dollar life insurance: economic benefit and loan regimes explained covers the structures.
Last reviewed October 10, 2026