life insurance tax treatment
What is Split Dollar Insurance? You may or may not have heard of this term. It sounds very sophisticated, at first, but with a little explanation, this type of insurance is easy to understand.
Split dollar insurance is when two entities, an employee and an employer, pay the premiums and benefits of a policy Life insurance is shared between the two. The policy benefits are divided and costs, or premiums can be divided, too. The insurance is for life employee. This insurance provides employees at reduced cost.
Why would a company want to have this type of insurance available? It is used to reduce life insurance policy costs an employee. This is seen as an additional benefit of employee value. Therefore, companies can use this type of insurance as a way to retain employees. As good and loyal employees committed to their company is not always an easy prospect. When the good fortune of the company come, there is a good group of workers at some companies realize they must do something to retain these people. Good people are hard to find.
Take, for example, the finance industry itself. In a financial brokers and authorized representative are doing a good job. That attention. But be noticed only by his own company, the other companies in the industry are hearing about what a good job of Joe Smith is getting in Eastern Financial. Before they know their employees are trying to be attracted to this company. Of course, this other company has much to offer, too. They say that her future reputation is impeccable and we want to come to work for us. Since we know that we have to make it worthwhile, it will offer benefits such as health insurance coverage and a 401 (k) plan. However, the loyal employee rejects the offer because they realize that they have full benefits and more. They also have insurance at a reduced cost. This discount rate provided by the current employer's insurance division in dollars, made a difference for the employee. This was a benefit that helped to that the final decision not to let a company that cares for its employees as well.
It is important to understand that the split dollar insurance is not a qualified plan. A qualified plan must meet certain Internal Revenue Code criteria. This means you can benefit from favorable tax treatment. What is good about qualified plans is that contributions are tax deductible and tax deferred growth. Moreover, there are employers who contribute to these plans. When they do, in general, their contributions to these plans are treated as an expense for tax purposes. However, the split dollar insurance does not fall into this category.
Moreover, the company did not benefit from the arrangements of dollars in parts, they just want to recoup their costs. They are usually not seeking a tax advantage either. They just want to be able provide an additional benefit to the employee. Usually this type of insurance is offered selectively as an executive benefit.
Life insurance can help provide protection and benefits to people in many different situations. The best way to gain an understanding of what is needed is to contact an insurance agent. You can get an understanding of your specific situation and propose the best products to provide comprehensive responses to the needs of one.
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Article Source: ArticlesBase.com – Split Dollar Insurance
