Split Dollar
A planning technique that uses funds from a third party to pay life insurance premiums.
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Life insurance premiums are often gifted to the policy owner through a trust. Once you have allocated some or all of your estate tax exemption, a split dollar strategy can be used to limit gifts to a trust within the annual exclusion amount while still paying large premium amounts to enhance estate planning. Split dollar can utilize private loans to fund premium payments, limiting the realized gift amount to the Economic Benefit Cost, which is typically nominal. This approach can provide an effective way to manage estate planning and gifting strategies.