Tag Archive for: Split Dollar

Life insurance paperwork on a table with a pen on top of it and dollar bills to the side.

The Importance of Understanding Split-Dollar Insurance

Split-dollar life insurance is a unique type of life insurance policy that can be extremely beneficial for businesses, including nonprofits and credit unions, and their key employees. Unlike other types of life insurance policies, split-dollar allows the organization to share in the risk and rewards associated with the policy.

A split-dollar life insurance arrangement is an executive compensation tool that involves an agreement between employer and employee to ‘split’ the benefits and ownership rights of a life insurance policy.

This type of arrangement can provide significant advantages for both the employer and the employee, making it a popular choice for many types of organizations. In this blog post, we will learn more about split-dollar life insurance and why it is so important for businesses.

For a more in-depth explanation of split-dollar life insurance, read our post, What is Split Dollar Insurance?

Listen and Learn
Hear what Acumen’s very own Scott B. Hinkle has to share about split-dollar life insurance. Scott is the leader of the firm’s Credit Union practice and brings over twenty-five years of experience in the financial services arena.

Firstly, Scott mentions that, “-it’s very important for the institutional consumer to understand with a very high level of clarity what they’re getting themselves into when they do choose a partner as it relates to a split dollar transaction.”

The key points he goes on to discuss are:

  • The Importance of Understanding Split-Dollar Transactions
  • What to Consider When Choosing a Partner
  • Exit Strategies
  • Repayment of Outstanding Loan Balance
  • Control Over the Retirement Vehicle
  • Benefits of Policy Performance
  • Design Considerations for Executives
  • The Decision Making Process


Split-dollar is a type of life insurance arrangement in which the death benefit is split between the policyholder and the beneficiary. The policyholder pays the premiums, but the beneficiary receives the death benefit. This can be important for executives who want to have control over their retirement benefits. It is important to understand how the policy may perform before choosing this type of life insurance.

Important Questions
Scott wants clients to consider some important questions regarding their split-dollar policy. These include:

  • What is the exit strategy? 
  • Do we have to wait around until the executive dies? 
  • Can there be a mechanism by which repayment of that outstanding loan balance is addressed during the life of the executive? 
  • Who has control over the retirement vehicle? 

If you’re the executive, 

  • Do you know if you have 100% control over distributions from the policy? 
  • Or do you have to go back to your former employer and work with them to do something different, to take money out and at what speed?
  • What if the policy outperforms original projections?
    • Who benefits? Does the executive benefit? Does the organization benefit? 
    • Or does effectively nobody benefit because nobody can take it out or use it in a different fashion than originally contemplated?


Historically many of these policies have outperformed projections and Scott believes that, “-if the policy can afford a larger benefit payout, it should provide a larger benefit payout to that executive”.

Key Takeaways from Scott
It’s important for clients to understand what they’re getting themselves into when they choose a partner for a split-dollar transaction. Some of the questions that are important for clients are about the exit strategy, control over the retirement vehicle, and whether the policy is performing as expected. Most executives just want to be in control of their retirement plan and not have anyone telling them what to do. It’s important for consumers to understand what they’re getting into and some of the design considerations that could be implemented.

Today, especially for credit unions, it’s important to understand these types of executive compensation arrangements.

Split-dollar life insurance arrangements can be complex and difficult to understand. This is why we’re here—at Acumen Insurance Solutions—to explain this form of executive compensation further. Reach out to us today!

employer and employee shaking hands

What is Split-Dollar Life Insurance?

Employee benefits are a necessary recruitment and retention tool for credit unions to compete with other employers for top talent—and life insurance is often a key component of these benefit packages.

There are many life insurance products available to employers, but split-dollar life insurance plans have become increasingly popular in recent years. Since split-dollar life insurance plans first became popular in the 1980s, the usage of these arrangements has continued to grow.

Today, especially for credit unions, it’s important to understand these types of executive compensation arrangements.

While more popular today than in the past, split-dollar life insurance arrangements can be complex and difficult to understand. This is why we’re here—at Acumen Insurance Solutions—to explain this form of executive compensation further.

Let’s discuss split-dollar life insurance basics: what is it, and what are its benefits?

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What is Split-Dollar Life Insurance?

Simply put, a split-dollar life insurance arrangement is a form of executive compensation, involving an agreement between employer and employee, who ‘split’ the benefits and ownership rights of a life insurance policy.

The employer and employee may share:

  • The premium cost
  • Cash value, and
  • Death benefits of a permanent life insurance policy

Additionally, the employer and employee may determine the following:

  • How long the plan will remain in effect
  • Expectations on what each party hopes to accomplish, and
  • When or how the plan will be terminated

Types of Split-Dollar Insurance Plans

There are two types of split-dollar life insurance plans.

  1. CASCollateral assignment split-dollar (CASD), and
  2. Endorsement split-dollar

Benefits of Collateral Assignment Split-Dollar (CASD) Life Insurance Plans

Executive retirement plans are a great way to recruit and retain top talent. They can provide long-term benefits to credit union executives beyond salaries and bonuses, including additional life insurance and cash payout,.

Additional benefits of CASD plans include:

  • The sponsoring credit union booking income on the loan made to the executive
  • Potential tax-deferred/tax-free treatment of retirement benefits for the executive
  • Recovery by the credit union of the capital used to fund the plan
  • Avoidance of corporate excise tax

Lastly, another advantage of split-dollar life insurance is that it can be used to provide financial security for loved ones in the event of the policy holder’s death. This form of executive compensation can also be used as a way to transfer wealth between generations.

Disadvantages of Split-Dollar Life Insurance

There are some disadvantages to split-dollar life insurance. One is that the policyholder may have to pay taxes on the death benefit if the beneficiary is not a family member. Another is that the policyholder may have to keep up with premium payments even if the beneficiary stops making contributions.

No two policies are the same, so it’s important to speak with an insurance professional about your specific plan.

Acumen Insurance Solutions is Here to Help!

At the end of the day, split-dollar life insurance is a personal decision. There are pros and cons to consider, but it can be a useful tool for financial planning.

Interested in learning more about how your organization might implement a split-dollar compensation plan? Reach out to our team at Acumen Insurance Solutions today. Then, read on to learn how to retain top talent using executive compensation.