Split Dollar

Split Dollar

Need

Two parties that are associated, one with a need for capital at death and the other with funds available to invest. Parties to the split dollar agreement may include:
– Corporation/shareholder
– Corporation/employee
– Corporation/RCA trust
Parties willing to jointly administer their split dollar agreement. Willing to seek professional advice.

Structure

Two parties enter into a formal split dollar agreement. Parties jointly purchase a life insurance policy. One party pays for and owns the level death benefit and the other party pays for and owns the cash value.

Comparative Analysis

Show how costs and benefits of a jointly owned life insurance policy can be allocated between two parties.

Benefits

Provides life insurance protection for one party. Provides a tax-sheltered investment for another party Flexibility to determine split of benefits. Flexible method to determine costs payable by each party. Benefits payable at death received tax free. Proceeds received by corporation may generate credit to Capital Dividend Account.

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