How to Set Up a Split Dollar Agreement

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Split dollar agreements are an important financial tool for employers and employees to consider when it comes to their financial planning. These agreements involve a portion of the employee’s life insurance premiums being paid by the employer, before being repaid in after-tax dollars by the employee. Such agreements offer a number of benefits for those involved - employers can benefit from tax deductions, while those on the other side of the agreement can make use of pre-tax salary deductions, reducing their overall costs associated with purchasing life insurance.

However, split dollar agreements should not be entered into lightly and all parties should understand fully what they are entering into and the legal implications thereof. Though such an agreement is largely a financial tool, it is also legally binding and must be properly drafted in order to ensure that everyone involved knows their rights and responsibilities under this arrangement. This is why it is so important to consult with an experienced lawyer or team dedicated to providing high-quality legal templates for such arrangements - such as Genie AI’s open source template library - prior to signing any documents related to a split dollar agreement.

At Genie AI, we provide free split dollar agreement templates which take into account each state’s unique regulations regarding these types of contracts. Our templates are designed to make setting up your own split dollar agreement as straightforward as possible without need for expert guidance or expensive services from qualified lawyers or other legal representatives; though if you do wish for extra support we do provide many options that suit everyone’s needs! So whether you want step-by-step guidance or just access our template library today, at Genie AI we have everything you need when it comes to setting up your own split dollar agreement safely and securely with peace of mind that all legal aspects have been taken care of correctly!

Definitions (feel free to skip)

Split Dollar Agreement: A contractual arrangement between an employer and an employee where they share the costs and benefits of a life insurance policy.

Tax Implications: The legal and financial consequences of a specific action, in this case, the split dollar agreement.

Tax Liability: The amount of taxes owed based on the income, expenses, and activities of a person or business.

Terms and Conditions: The rules and requirements that must be met for an agreement to be valid and binding.

Written Agreement: A legally binding document that outlines the details of the arrangement between two or more parties.

Beneficiaries: The person or persons who will receive the benefits from a life insurance policy.

Premium Payments: The payments that are required to maintain a life insurance policy.

Life Events: Significant changes in a person’s life, such as marriage, divorce, or the birth of a child.

Ownership: Having the legal right to possess or control something.

Contents

• Definition of a Split Dollar Agreement
• Benefits of a Split Dollar Agreement
• Understanding the Tax Implications of a Split Dollar Agreement
• Researching Federal and State Tax Laws
• Calculating Tax Liability
• Structuring a Split Dollar Agreement
• Outlining Terms and Conditions
• Drafting a Written Agreement
• Consulting Financial and Legal Professionals
• Choosing a Life Insurance Policy for a Split Dollar Agreement
• Establishing Coverage Needs
• Comparing Insurance Providers
• Fundamentals of Premium Payments
• Setting Payments
• Monitoring Payment History
• Factors Affecting the Split Dollar Agreement
• Changes in Beneficiaries
• Adjustments in Coverage
• Flexibility of Terms
• Ongoing Management and Maintenance of a Split Dollar Agreement
• Recording Life Events
• Updating Agreement
• Termination of a Split Dollar Agreement
• Releasing All Liabilities
• Transferring Ownership of Policy
• Evaluating Split Dollar Agreement Performance
• Comparing to Financial Goals
• Assessing Risk Level
• Developing Future Strategies

Get started

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FAQ:

Q: Is a Split Dollar Agreement suitable for a technology business?

Asked by John on June 9th 2022.
A: Generally speaking, a Split Dollar Agreement can be suitable for any type of business in any sector and industry, including technology businesses. However, it’s important to consider the specifics of your business and the needs of your stakeholders to ensure the Agreement is tailored to your needs. It may be necessary to consult a lawyer or specialist financial advisor to ensure the Agreement meets all applicable regulations and laws, and provides the best outcome for everyone involved.

Q: What are the legal implications of setting up a Split Dollar Agreement in the USA?

Asked by Maria on August 10th 2022.
A: When setting up a Split Dollar Agreement in the USA, it is important to consider the legal implications as this type of arrangement is subject to various laws and regulations. It is advisable to consult a lawyer with knowledge of local laws and regulations in order to ensure that the Agreement meets all applicable requirements. Generally speaking, there may be tax implications and liabilities associated with this type of agreement, which must be taken into consideration.

Q: Is a Split Dollar Agreement suitable for a SaaS business?

Asked by Matthew on July 18th 2022.
A: A Split Dollar Agreement can be suitable for any type of business in any sector and industry, including SaaS businesses. However, it’s important to consider the specifics of your business and the needs of your stakeholders to ensure the Agreement is tailored to your needs. It may be necessary to consult a lawyer or specialist financial advisor to ensure the Agreement meets all applicable regulations and laws, and provides the best outcome for everyone involved.

Q: What tax implications need to be considered when setting up a Split Dollar Agreement?

Asked by Sophia on October 17th 2022.
A: When setting up a Split Dollar Agreement, there are several tax implications that must be considered. Different regulations may apply depending on where you are based, so it is important to consult with a lawyer or financial advisor who is knowledgeable about local laws and regulations. Generally speaking, taxes may be due on payments made under the Agreement, depending on how it has been structured.

Q: How do I set up a Split Dollar Agreement in the UK?

Asked by David on May 12th 2022.
A: Setting up a Split Dollar Agreement in the UK requires careful consideration of local laws and regulations. It is important to consult with an experienced lawyer or financial advisor who has knowledge of local laws in order to ensure that everything is properly structured and compliant with applicable regulations. Generally speaking, there may be various tax implications associated with this type of arrangement that must be taken into consideration when setting up an agreement in the UK.

Q: Can I set up a Split Dollar Agreement across different jurisdictions?

Asked by Emma on February 19th 2022.
A: Yes, it is possible to set up a Split Dollar Agreement across different jurisdictions or countries, although there may be additional complexities involved due to different laws and regulations that apply in each jurisdiction. It is important to consult with an experienced lawyer or financial advisor who has knowledge of local laws in order to ensure that everything is properly structured and compliant with applicable regulations within each jurisdiction.

Q: What documents are needed when setting up a Split Dollar Agreement?

Asked by Jacob on November 21st 2022.
A: When setting up a Split Dollar Agreement, there are several documents that are typically needed in order to create an effective agreement that meets all applicable regulations and laws within each country or jurisdiction involved. These documents may include written agreements outlining all relevant details of the arrangement; payment schedules; agreements regarding taxes; wills or trusts; insurance policies; irrevocable life insurance trusts; loan agreements; etc. It is advisable to consult with an experienced lawyer or financial advisor who has knowledge of local laws in order to ensure that everything is properly structured and compliant with applicable regulations within each jurisdiction.

Example dispute

Split Dollar Agreement Lawsuits

• A plaintiff may raise a lawsuit referencing a split dollar agreement on the basis of breach of contract, negligence, or fraud.
• Such a lawsuit may be brought when one party fails to uphold their end of the agreement, or when they fail to pay the money that is due.
• In order to win, the plaintiff must prove that the other party did not fulfill their obligations, and that the plaintiff suffered damages as a result.
• The plaintiff can recover damages for lost wages, lost profits, emotional distress, or any other losses as a result of the breach of contract.
• In some cases, the court may also award punitive damages or attorneys’ fees.
• Settlement may be reached through negotiation between the parties, or through court proceedings.
• Damages, if any are awarded, are typically calculated based on the amount of money that the plaintiff lost due to the breach of contract.

Templates available (free to use)

Split Dollar Agreement

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