PHOENIX — Advisers who take the time to understand and help implement a private loan regime/split dollar arrangement can net ultrahigh-net-worth clients big estate tax savings and flexibility, as well as efficient gift tax leverage.
A split dollar arrangement is an agreement between two parties to split a life insurance policy’s cash value, death benefits, and premiums, explains Steve Kroeger, a senior director of advanced sales with Crump Life Insurance Services. In private split dollar financing, the split is between the insured person (or a family member, another trust, or a business) and an irrevocable life insurance trust, or ILIT, according to Kroeger, who spoke at NAPFA's spring conference. That puts the life insurance policy outside the owner’s estate, but still gives the owner access to its equity, he says.
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