The utilization of split-dollar life insurance plans has intricated both employers and employees in recent times. Faegre Drinker Biddle & Reath LLP, through a report, outlines the benefits of this intricate strategy in the current tight and competitive hiring market.
Split-dollar life insurance, an uncommon but innovative approach, allows the sharing of premiums and benefits of a life insurance policy between two parties. This strategy can serve a multitude of uses and may be valuable to corporations pursuing diverse approaches to attract and retain their desired workforce.
While these types of plans are often established for key employees as a fringe benefit, the report notes that split-dollar setups can extend to individual arrangements, trusts, or even across generations. In this way, they can support a meticulously conceived estate plan. Careful structuring and regular monitoring of these arrangements are however recommended to ensure mutual benefits and prevent unforeseen consequences from arising.
As our world continues to grapple with changing laws and markets, aging demographics, and evolving company-employee relationships, alternative legal and financial strategies such as the split-dollar life insurance plan offer thought-provoking points of discussion for legal professionals.
Adopting such approaches should be done with a thorough understanding of their benefits and risks. Employers considering these unconventional methods are urged to seek legal counsel to ensure the proper establishment and ongoing maintenance of these complex arrangements.