Key takeaways
- T.D. 9092 describes "two mutually exclusive regimes — an economic benefit regime and a loan regime" for split-dollar arrangements, and states that "ownership of the life insurance contract determines which regime applies."
- Under the economic benefit regime, 26 C.F.R. § 1.61-22(d)(3) measures the value of the "current life insurance protection" provided to the non-owner each year, and that value is the starting point for the non-owner's tax.
- Under the loan regime, 26 C.F.R. § 1.7872-15 treats premium payments as split-dollar loans, and a loan that does not carry sufficient interest produces "forgone interest" treated as transferred to the borrower and paid back as interest.
- "Equity" and "non-equity" split-dollar are industry labels that do not appear in the regulations, and the tax result turns on the regime, not on the label.
- A split-dollar policy owned by an employer that is directly or indirectly a beneficiary can fall within the section 101(j) definition of an employer-owned life insurance contract, which brings written notice-and-consent requirements into play.
- Notice 2002-8 revoked earlier interim guidance and announced the two-regime approach, so the date an arrangement was entered into or materially modified can matter to which rules govern it.
- No arrangement described here produces a set tax result for any particular business or person, because the outcome depends on ownership, the written agreement and the parties' facts.
Published October 6, 2026 · Updated October 8, 2026
Short Answer: What Split-Dollar Life Insurance Is
Split-dollar life insurance is an arrangement in which two parties, usually a business and an executive or owner-employee, share the premiums and benefits of one life insurance policy, and at least one paying party expects to be repaid from the policy. Federal tax rules generally sort such an arrangement into one of two mutually exclusive regimes, and who owns the policy decides which one applies.
A closely held company, its owner-employees and its finance lead usually meet split-dollar when the business wants to fund a death benefit for a key person's family without permanently giving up the money it spends on premiums. Business Life Insurance treats the policy here as a funding mechanism inside that business plan. This page covers the federal framework: the definition in Treasury Regulation § 1.61-22, the economic benefit regime, the loan regime in Treasury Regulation § 1.7872-15, ownership mechanics, the employer-owned life insurance rules and the tax points that shape a split dollar agreement.
How a Split-Dollar Arrangement Works
The business problem comes first. An employer wants a key executive's family to receive a meaningful death benefit, but it also wants the dollars it puts into premiums to come back to the company eventually. A split dollar arrangement solves that by dividing one policy between two parties under a written agreement. The agreement states who pays which part of each premium, who is entitled to which part of the death benefit and the cash value (the savings-like value that builds inside a permanent policy as a contract feature), and what happens when the arrangement ends.
The regulatory definition
Treasury Regulation § 1.61-22(b)(1) defines a split-dollar life insurance arrangement as "any arrangement between an owner and a non-owner of a life insurance contract" that meets three criteria:
- "Either party to the arrangement pays, directly or indirectly, all or any portion of the premiums on the life insurance contract, including a payment by means of a loan to the other party that is secured by the life insurance contract";
- "At least one of the parties to the arrangement paying premiums ... is entitled to recover (either conditionally or unconditionally) all or any portion of those premiums and such recovery is to be made from, or is secured by, the proceeds of the life insurance contract"; and
- The arrangement is not part of a group-term life insurance plan, unless that group-term plan provides permanent benefits to employees.
In plain terms: someone pays premiums, a premium-payer expects to be paid back out of the policy, and ordinary group-term coverage is generally outside the definition. Section 1.61-22(b)(2) adds a special rule under which certain other owner–non-owner arrangements are treated as split-dollar arrangements "regardless of whether the criteria of paragraph (b)(1) of this section are satisfied."
Ownership picks the regime
T.D. 9092, the Treasury decision that finalized these rules, states that the final regulations "retain the approach of using two mutually exclusive regimes — an economic benefit regime and a loan regime," and that "ownership of the life insurance contract determines which regime applies." The decision also notes that a special rule "applies when the employer, service recipient or donor is the owner."
Two structures follow from that test:
- Endorsement method. The employer applies for and owns the policy, then endorses (assigns by a written policy endorsement) part of the death benefit to the employee's chosen beneficiary. Because the employer is the owner, this structure generally falls under the economic benefit regime of § 1.61-22.
- Collateral assignment method. The employee, or a trust, owns the policy. The employer pays premiums and takes a collateral assignment (a security interest in the policy) to secure repayment. Because the employer is a lender rather than the owner, this structure generally falls under the split-dollar loan rules of § 1.7872-15.
Employer-owned life insurance overlap
A split-dollar policy can also be an employer-owned life insurance contract (often shortened to EOLI). Section 101(j)(3)(A) of the Internal Revenue Code defines that term as a contract "owned by a person engaged in a trade or business and under which such person (or a related person ...) is directly or indirectly a beneficiary under the contract," covering an insured who is an employee when the contract is issued. An employer that owns an endorsement policy and recovers its premiums from the death proceeds may fit that description. Whether a given contract does turns on its facts, and split-dollar regime, ownership and taxation, together with section 101(j) notice and consent and Form 8925 reporting, need individual review of the contracts involved by the insurers and a qualified tax professional.
Who a Split-Dollar Plan Is Typically For
Split-dollar shows up most often in closely held businesses. A company with a handful of owners and a few essential executives may want to reward or retain one or two people with a death benefit without building a broad-based program for the entire workforce. A split dollar life insurance plan can be offered to selected individuals.
The parties typically include:
- Employers and key executives, where the employer wants a defined right to recover its premium outlay from the policy.
- Owner-employees of C corporations and S corporations, where the corporation enters into the arrangement with a shareholder who also works in the business.
- Partnerships and their partners, where the entity and an individual partner share a policy's costs and benefits.
- Professional practices, where a firm wants to support a senior professional's family; how ownership and succession work in a practice such as a law firm is covered in Business Life Insurance's page on life insurance for law firms.
Ownership form changes the employer-owned life insurance analysis. IRS Notice 2009-48, A-1, states that "a contract that is owned by the owner of an entity engaged in a trade or business (such as for purposes of financing the purchase of an equity interest of another owner) ... is not an employer-owned life insurance contract." Notice 2009-48, A-3, adds that, if a contract is otherwise described in section 101(j)(3), ownership "by a partnership or sole proprietorship does not prevent the contract from being treated as an employer-owned life insurance contract," while "a life insurance contract that is owned by a sole proprietor on his or her own life is not, however, an employer-owned life insurance contract." Notice 2009-48 also confirms, in A-5, that section 101(j)(5)(A) "provides that the term 'employee' includes an officer, director, and highly compensated employee."
This page is for readers who want to understand the federal tax framework. It is not a basis for structuring any arrangement, which turns on the contracts and the parties' facts.
When a Split-Dollar Arrangement May Fit
The pattern is usually recognizable. A split-dollar arrangement is commonly considered in situations such as these:
- A family death benefit with recovery. An employer wants a key employee's family to receive part of a policy's death benefit while the employer keeps the right to recover what it paid. The endorsement method expresses that split directly.
- Employee or trust ownership with employer financing. The employee or a trust wants to own the policy, and the employer is willing to advance premiums that are documented as loans secured by the policy. That is the structure § 1.7872-15 addresses under its heading "Split-dollar loans."
- A selective benefit. The business wants a nonqualified benefit (one that is not a tax-qualified retirement plan) for chosen individuals rather than a program open to every employee.
- Coordination with continuity planning. An owner group wants a policy that also serves a succession objective, with the written agreement defining each party's share.
Whether any of these fits depends on facts the regulations make central: who will own the policy, the tax positions of the business and the individual, the policy type and its cash value features, and the repayment terms the agreement sets.
When a Split-Dollar Arrangement May Not Fit
Complications arise in predictable places.
The premium deduction rule
Section 264(a)(1) of the Internal Revenue Code provides that "No deduction shall be allowed for— (1) Premiums on any life insurance policy, or endowment or annuity contract, if the taxpayer is directly or indirectly a beneficiary under the policy or contract." An employer that recovers its premiums from the death proceeds may be directly or indirectly a beneficiary of the policy in that sense. A business looking for a current premium deduction from a split-dollar policy runs into this rule, and how it applies to a particular arrangement is part of the individual review. Business Life Insurance explains the same rule for key-person coverage on its page on key person insurance deductibility.
The employer-owned life insurance cap
Section 101(a)(1) generally excludes from gross income "amounts received ... under a life insurance contract, if such amounts are paid by reason of the death of the insured." For an employer-owned contract, section 101(j)(1) provides that the excluded amount "shall not exceed an amount equal to the sum of the premiums and other amounts paid by the policyholder for the contract." The cap is lifted only when two things are both true: a section 101(j)(2) exception applies (one based on the insured's status, or one for amounts paid to the insured's heirs), and the section 101(j)(4) notice and consent requirements were met before the contract was issued. Notice and consent alone do not lift the cap, and neither does an exception alone. An arrangement in which an employer-owned policy was issued without that paperwork may not fit the plan's purpose.
Unplanned imputed interest
Under the loan regime, a premium loan that does not carry sufficient interest produces forgone interest each year, as § 1.7872-15(e)(3) describes. Parties who have not planned for that annual amount, its character as compensation or a gift, and any reporting consequences may find the arrangement poorly matched to their goals.
Policy transfers
Moving a policy from one party to another, for example when an arrangement ends or ownership changes in a succession, can bring in the transfer-for-value rule of section 101(a)(2).
Pass-through entities
When the business is an S corporation or a partnership, the consequences at the entity level and the owner level may not mirror a C corporation arrangement. The interaction is fact-specific.
Ownership, Premiums and Beneficiary in a Split-Dollar Plan
Mechanics differ by regime, and the written split-dollar agreement sets the details: the premium-sharing formula, the division of the death benefit and the treatment of cash value when the arrangement ends.
Economic benefit regime: employer as owner
- Owner: the employer, service recipient or donor.
- Premiums: the employer pays all or part of them; in some designs the employee contributes a share.
- Beneficiary: the employee names a beneficiary for the endorsed portion of the death benefit.
- Proceeds: at death, the employer receives the amount the agreement makes "payable to the owner," usually its premium recovery or a cash-value measure, and the employee's beneficiary receives the endorsed balance.
Loan regime: employee or trust as owner
- Owner: the employee, or a trust established by the employee.
- Premiums: the employer pays them, and each payment is treated under § 1.7872-15 as a loan to the owner.
- Collateral: the owner assigns the policy to the employer as security for repayment.
- Proceeds: at death, the employer is repaid from the proceeds under the collateral assignment, and the owner's named beneficiary receives the remainder.
State law and EOLI
Policy ownership, assignments, endorsements and beneficiary designations are governed by insurance and contract law, and those rules vary by state. An insurer's own endorsement and assignment forms and procedures also vary from insurer to insurer and are confirmed with the insurer involved. Where the employer owns the policy, the section 101(j) definition of an employer-owned contract becomes part of the ownership analysis.
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Tax Treatment Under Each Regime
Federal income tax treatment follows the regime, and the regime follows ownership.
Economic benefit regime (26 C.F.R. § 1.61-22)
Section 61 of the Internal Revenue Code defines gross income as "all income from whatever source derived," including "Compensation for services, including fees, commissions, fringe benefits, and similar items." Section 1.61-22 supplies the method for valuing what a non-owner, typically the employee, receives from an employer-owned split-dollar policy.
Section 1.61-22(d)(3)(i) defines the amount of current life insurance protection as "the excess of the death benefit of the life insurance contract (including paid-up additions thereto) over the total amount payable to the owner (including any outstanding policy loans that offset amounts otherwise payable to the owner) under the split-dollar life insurance arrangement," reduced by certain cash value amounts already taken into account or paid for by the non-owner.
Section 1.61-22(d)(3)(ii) then provides that the cost of that protection "equals the amount of the current life insurance protection provided to the non-owner ... multiplied by the life insurance premium factor designated or permitted in guidance published in the Internal Revenue Bulletin." In plain English, the regulation takes the portion of the death benefit at risk for the employee's side and multiplies it by an IRS-designated factor. That annual figure is the cost of current life insurance protection. Under § 1.61-22(d)(2), the value of the economic benefits also includes policy cash value to which the non-owner has current access and any other economic benefits provided, and under § 1.61-22(d)(1) the total is reduced by the consideration the non-owner pays to the owner for those benefits.
Loan regime (26 C.F.R. § 1.7872-15)
Under § 1.7872-15, the employer's premium payments are split-dollar loans. For a demand loan (one repayable on demand), § 1.7872-15(e)(3)(ii) tests the loan each calendar year: it "provides for sufficient interest for the calendar year if the rate ... at which interest accrues on the loan's adjusted issue price during the year is no lower than the blended annual rate for the year." The regulation notes that the IRS "publishes the blended annual rate in the Internal Revenue Bulletin in July of each year."
If the interest falls short, § 1.7872-15(e)(3)(iii)(A) provides that "the amount of forgone interest ... is treated as transferred by the lender to the borrower and as retransferred as interest by the borrower to the lender." Forgone interest is generally treated as transferred "on the last day of the calendar year," with exceptions for the borrower's death, liquidation or termination and for full repayment.
The character of that deemed transfer depends on the relationship. In an example in § 1.7872-15, an employer's interest-free premium loan to an employee's child is "restructured as two deemed below-market split-dollar demand loans: a compensation-related below-market split-dollar loan between X and B and a gift below-market split-dollar loan between B and A." The same example applies the limit in section 7872(d)(1) to cap the forgone interest deemed paid by the individual at that individual's net investment income.
Older arrangements and Notice 2002-8
Notice 2002-8 revoked earlier interim guidance "regarding the tax treatment of parties entering into split-dollar life insurance arrangements," and announced proposed regulations "requiring the taxation of parties to a split-dollar life insurance arrangement under one of two mutually exclusive regimes." It described one regime in which "the economic benefits ... generally are treated as transfers to the benefited party," and another in which the sponsor's payments "generally are treated as a series of loans to the benefited party." Notice 2002-8 also contains "Revised Standards for Valuing Current Life Insurance Protection" in its Part III. T.D. 9092 includes its own effective date and obsolescence provisions. Under § 1.61-22(j), the final regulations apply to a split-dollar life insurance arrangement entered into after September 17, 2003, and an arrangement entered into on or before that date is treated as a new arrangement, entered into on the date of the modification, if it is materially modified after September 17, 2003.
Deductions and the death benefit
The section 264(a)(1) no-deduction rule applies to the premium side: no deduction is allowed for premiums if the taxpayer is directly or indirectly a beneficiary under the policy or contract. On the death benefit side, the section 101(a)(1) exclusion is subject to the transfer-for-value limit of section 101(a)(2) and, for an employer-owned contract, the section 101(j) cap, which is lifted only when a section 101(j)(2) exception applies and the section 101(j)(4) notice and consent were given before issue.
Labels versus regimes
"Equity" and "non-equity" split-dollar are industry labels, not terms used in § 1.61-22. The tax consequences turn on which regime applies under the regulations, not on the label.
What Affects the Cost and the Amount of Benefit
Several variables drive the numbers, and none of them is fixed by the regulations.
- Policy type. Whether the arrangement uses a permanent cash-value policy or term coverage shapes the premium and whether any cash value accumulates. Section 7702 defines a "life insurance contract" for federal tax purposes as one that is life insurance "under the applicable law" and meets either the cash value accumulation test or the guideline premium requirements together with the cash value corridor.
- Death benefit at risk. Under the economic benefit regime, the measured benefit rises and falls with the amount of current life insurance protection under § 1.61-22(d)(3)(i), which in turn depends on how much the agreement makes payable to the owner.
- The premium factor. The annual cost of protection uses "the life insurance premium factor designated or permitted in guidance published in the Internal Revenue Bulletin," which varies with that guidance.
- Loan balance and rate. Under the loan regime, forgone interest depends on the loan's outstanding balance and on the blended annual rate or other applicable rate for the year under § 1.7872-15.
- Recovery terms. What the employer ultimately recovers depends on the agreement's terms and on the policy's cash value or proceeds when the arrangement ends.
Premium amounts, policy charges and cash-value performance vary by insurer and by contract and are confirmed with the insurers involved.
Common Split-Dollar Structures
Employer-pay-all endorsement
The employer owns the policy, pays every premium and endorses a stated death benefit amount to the employee's beneficiary. Because the employer is the owner, the economic benefit regime of § 1.61-22 generally applies, and the employee's measured benefit each year is the cost of current life insurance protection.
Collateral assignment loan arrangement
The employee or a trust owns the policy, the employer pays premiums as loans, and the owner assigns the policy to the employer as collateral. The loan rules of § 1.7872-15 generally apply, with each loan tested for sufficient interest.
Private split-dollar
The parties need not be an employer and an employee. T.D. 9092 refers to the "employer, service recipient or donor" as possible owners, and the § 1.7872-15 example involving an employee's child and an irrevocable trust shows how family relationships change the analysis. The same two regimes apply based on ownership, but the deemed transfer may be a gift rather than compensation, depending on the relationship. The personal estate-planning side of trust-owned coverage is outside this site's topic.
Equity and non-equity designs
The regulations do not use either term, and neither label determines the regime.
Split-dollar inside succession or buy-sell planning
Owners sometimes pair a split-dollar policy with a buy-sell agreement or a succession plan. Any later transfer of the policy brings in section 101(a)(2), which limits the exclusion after "a transfer for a valuable consideration" to "the actual value of such consideration and the premiums and other amounts subsequently paid by the transferee," unless a listed exception applies, such as a transfer "to the insured, to a partner of the insured, to a partnership in which the insured is a partner, or to a corporation in which the insured is a shareholder or officer." Business Life Insurance covers owner-held policies in its page on cross-purchase buy-sell agreements.
Potential Advantages of a Split-Dollar Arrangement
These features are descriptive. None of them is a promise of a tax result, savings or suitability for any reader's business.
- Shared cost with recovery. The employer can fund a meaningful death benefit for a key person's family while keeping a contractual right to recover its premiums from the policy.
- Selectivity. The arrangement can be offered to chosen individuals rather than to the entire workforce.
- Owner access under the loan regime. When the employee or a trust owns the policy, the owner may have access to cash value, subject to the collateral assignment and the agreement.
- Defined measurement rules. Each regime gives the parties a regulatory method for valuing the benefit: the protection-cost formula in § 1.61-22(d)(3) or the sufficient-interest test in § 1.7872-15(e)(3).
- Alignment with continuity goals. The agreement can be drafted to coordinate with a succession plan or buy-sell agreement, subject to the transfer-for-value limits in those settings.
Important Considerations and Risks
Documentation
A split dollar agreement in writing is what defines ownership, the premium-sharing formula, the death benefit split, the collateral or endorsement terms and how the arrangement ends. Because the regulations measure the employee's benefit by what is "payable to the owner under the split-dollar life insurance arrangement," vague or inconsistent terms make the measurement itself uncertain.
Section 101(j) notice and consent
Where the policy is an employer-owned contract, section 101(j)(4) requires that, "before the issuance of the contract," the employee be "notified in writing that the applicable policyholder intends to insure the employee's life and the maximum face amount," provide "written consent to being insured under the contract and that such coverage may continue after the insured terminates employment," and be "informed in writing that an applicable policyholder will be a beneficiary." Notice 2009-48, A-7, states that a wholly owned corporation and its employee-owner are not excused, and that "actual knowledge alone" cannot substitute for written notice and consent. Notice 2009-48, A-13, says the IRS will not challenge the applicability of a section 101(j)(2) exception based on an inadvertent failure to satisfy notice and consent if the policyholder made a good faith effort to satisfy those requirements, the failure was inadvertent, and it was discovered and corrected no later than the due date of the tax return for the taxable year in which the contract was issued; it also states that the failure "cannot be corrected after the insured employee has died." The instructions to Form 8925, the IRS form used to report employer-owned life insurance contracts, state that written consent "is not valid unless the related employer-owned life insurance contract is issued ... within a year after the consent was executed, or before the employee terminates employment ..., whichever is earlier." Who files Form 8925, and when, is set out in the form's instructions.
Modifications of older arrangements
Because the regulations' effective date turns on when an arrangement was entered into or materially modified, a change to an older arrangement can bring it under the final regulations. What counts as a material modification is a fact-specific question.
Transfers and imputed interest
A transfer of the policy at rollout or exit may implicate section 101(a)(2). Under the loan regime, a loan without sufficient interest produces forgone interest every year it remains below-market, with compensation or gift consequences for the parties.
Structure, ownership and tax treatment are confirmed with qualified tax, legal and insurance professionals before any of these points is relied on.
Alternatives to a Split-Dollar Arrangement
Other structures address similar objectives, and the choice among them depends on the parties' ownership, tax and benefit goals.
- Executive bonus arrangement. "Executive bonus plan," "section 162 plan" and "restricted executive bonus arrangement" (REBA) are industry shorthand for an executive-bonus arrangement; section 162 does not create a special qualified plan, and none of these terms is defined in the Internal Revenue Code or regulations. The employer pays a bonus that the employee uses for premiums on a policy the employee owns. Business Life Insurance compares executive bonus and split-dollar arrangements on its executive bonus plan pages.
- Corporate-owned life insurance. The employer owns the policy and is its beneficiary, with no death benefit split with the employee. The section 101(j) rules apply to such a contract on the same terms as to an employer-owned split-dollar policy.
- Nonqualified deferred compensation. The employer promises a future payment to the executive, which the employer may or may not informally fund with a policy it owns. Deferred compensation has its own federal rules, which need separate review.
The broader landscape of insurance-funded business planning appears on Business Life Insurance's business life insurance overview page.
Hypothetical Example: Economic Benefit Regime vs. Loan Regime
This example is hypothetical. Its figures are round, chosen only for illustration, and do not come from any IRS table or published rate.
Assumptions:
- A corporation and one employee-executive.
- A permanent policy with a $1,000,000 death benefit.
- The employer pays $20,000 in premiums in year one.
- An illustrative premium factor of $2 per $1,000 of protection.
- An illustrative blended annual rate of 4%.
- No other payments, policy loans or cash value amounts taken into account.
Scenario A: endorsement method, economic benefit regime
The employer owns the policy and is entitled to recover its $20,000.
- Death benefit: $1,000,000.
- Amount payable to the owner (employer recovery): $20,000.
- Current life insurance protection to the employee: $1,000,000 − $20,000 = $980,000.
- Protection in thousands: $980,000 ÷ $1,000 = 980.
- Cost of protection: 980 × $2 = $1,960.
Under these assumptions, $1,960 is the year-one cost of current life insurance protection measured under § 1.61-22(d)(3).
Scenario B: collateral assignment method, loan regime
The employee owns the policy, and the employer's $20,000 payment is an interest-free demand loan.
- Outstanding loan balance: $20,000.
- Interest at the illustrative rate: $20,000 × 0.04 = $800.
- Interest actually charged: $0.
- Forgone interest: $800 − $0 = $800.
Under these assumptions, $800 of forgone interest is treated under § 1.7872-15(e)(3) as transferred from the employer to the employee and retransferred as interest; in an employment setting that deemed transfer is compensation-related.
The two scenarios measure different things on the same facts, which is why ownership matters so much. Actual premium factors and rates are published by the IRS and change over time, and the result of any real arrangement depends on its own agreement and facts. This example is not any reader's result.
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Frequently Asked Questions
What is a split-dollar life insurance arrangement?
It is an arrangement between an owner and a non-owner of a life insurance policy in which either party pays premiums and a premium-payer is entitled to recover them from, or with security in, the policy proceeds. That is the definition in 26 C.F.R. § 1.61-22(b)(1). Ordinary group-term coverage is generally outside it.
What are the two tax regimes for split-dollar life insurance?
They are the economic benefit regime under Treas. Reg. § 1.61-22 and the loan regime under Treas. Reg. § 1.7872-15. T.D. 9092 calls them "two mutually exclusive regimes," so an arrangement falls under one or the other, not both.
How does ownership of the policy determine which regime applies?
T.D. 9092 states that "ownership of the life insurance contract determines which regime applies." When the employer, service recipient or donor owns the policy, the economic benefit regime generally applies. When the employee or a trust owns it and the employer's payments are secured by the policy, the split-dollar loan rules generally apply.
What is the economic benefit regime for split-dollar arrangements?
It is the regime in which the owner, typically the employer, provides life insurance protection to the non-owner, and that protection is valued each year. Section 1.61-22(d)(3) measures the protection as the death benefit in excess of what is payable to the owner, then multiplies it by a premium factor designated in IRS guidance. The value of the economic benefits also includes policy cash value to which the non-owner has current access and any other economic benefits, reduced by what the non-owner pays.
What is the loan regime for split-dollar arrangements?
It is the regime in which the non-owner's premium payments are treated as loans to the policy owner under § 1.7872-15. A demand loan is tested each year against the blended annual rate, and any shortfall is forgone interest treated as transferred to the borrower and paid back as interest, with compensation or gift character depending on the relationship.
What did Notice 2002-8 say about split-dollar arrangements?
Notice 2002-8 revoked earlier interim guidance and announced proposed regulations taxing split-dollar arrangements under "one of two mutually exclusive regimes," one treating economic benefits as transfers and the other treating payments as loans. It also set out revised standards for valuing current life insurance protection. Which guidance governs an older arrangement depends on its dates and any later modification.
Can a split-dollar life insurance contract be employer-owned life insurance?
Yes, when it meets the section 101(j)(3) definition: owned by a person engaged in a trade or business that is directly or indirectly a beneficiary, covering an employee at issue. An employer-owned endorsement policy may meet it. Whether a particular contract does depends on its facts.
Are 'equity' and 'non-equity' split-dollar defined in the IRS regulations?
No. They are industry labels that do not appear in § 1.61-22. The tax consequences turn on which of the two regulatory regimes applies.
Can a split-dollar arrangement be used in a business succession or buy-sell plan?
It can be coordinated with one, but transfers of the policy may bring in section 101(a)(2), which limits the death benefit exclusion after a transfer for valuable consideration unless an exception applies. How that rule interacts with a given plan depends on the contracts and the parties.
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