Hawaii Split-Dollar Insurance Agreement with Policy Owned Jointly by Employer and Employee

• Category: Insurance - Contracts
• State: Multi-State
• Control #: US-1086BG
• Format: Word; Rich Text

Description

In a split-dollar plan, an employer and employee execute a written agreement that outlines how they will share the premium cost, cash value and death benefit of a permanent life insurance policy. Split-dollar plans are frequently used by employers to provide supplemental benefits for executives and/or to help retain key employees. The agreement outlines what the employee needs to accomplish, how long the plan will stay in effect and how the plan will be terminated. It also includes provisions that restrict or end benefits if the employee decides to terminate employment or does not achieve agreed-upon performance metrics. A Hawaii Split-Dollar Insurance Agreement with Policy Owned Jointly by an Employer and Employee is a mutually beneficial arrangement meant to provide life insurance coverage while also offering attractive tax advantages. This innovative financial strategy primarily involves the sharing of premium payments between an employer and an employee. In this type of split-dollar insurance agreement, the employer and employee jointly own an insurance policy, typically a cash value life insurance policy, in which the death benefit is payable to the designated beneficiaries upon the insured's passing. The agreement outlines the specific terms, contributions, and benefits associated with the arrangement. There are two significant types of Hawaii Split-Dollar Insurance Agreements: 1. Economic Benefit Regime: Under this type of split-dollar agreement, the employer pays the policy's total premiums over the insured's lifetime. The employer is considered the policy's owner or beneficiary and has the right to claim the cash surrender value, subject to the employee's right to recover premium payments. Upon the insured's death, the employer is typically reimbursed the premiums paid, and the remaining death benefit goes to the beneficiaries. 2. Loan Regime: In a loan-based split-dollar agreement, the employer loans funds to the employee to pay a portion or all of the policy premiums. The employee is responsible for repaying the employer's loan at an agreed-upon interest rate. Upon the insured's death, the employer is primarily entitled to the loan value and any outstanding interest, while the remaining death benefit is paid to the beneficiaries. Both types of agreements guarantee the employee a specific level of death benefit protection while offering potential tax advantages. Since the premium payments made by the employer are considered a loan, they might be tax-free to the employee. Additionally, the growth of the policy's cash value is tax-deferred, increasing the policy's potential estate value. Hawaii Split-Dollar Insurance Agreements with Policies Owned Jointly by Employers and Employees provide flexibility in terms of policy ownership, premium payments, and death benefit distribution. These agreements serve as an attractive employee benefit that can supplement other retirement plans and offer an additional layer of financial security. If considering a Hawaii Split-Dollar Insurance Agreement, it is crucial to consult a knowledgeable professional who can tailor the specific terms of the arrangement to meet the employer's and employee's needs. Proper legal and tax guidance should be sought to ensure compliance with relevant regulations and to maximize the potential benefits of the strategy.

A Hawaii Split-Dollar Insurance Agreement with Policy Owned Jointly by an Employer and Employee is a mutually beneficial arrangement meant to provide life insurance coverage while also offering attractive tax advantages. This innovative financial strategy primarily involves the sharing of premium payments between an employer and an employee. In this type of split-dollar insurance agreement, the employer and employee jointly own an insurance policy, typically a cash value life insurance policy, in which the death benefit is payable to the designated beneficiaries upon the insured's passing. The agreement outlines the specific terms, contributions, and benefits associated with the arrangement. There are two significant types of Hawaii Split-Dollar Insurance Agreements: 1. Economic Benefit Regime: Under this type of split-dollar agreement, the employer pays the policy's total premiums over the insured's lifetime. The employer is considered the policy's owner or beneficiary and has the right to claim the cash surrender value, subject to the employee's right to recover premium payments. Upon the insured's death, the employer is typically reimbursed the premiums paid, and the remaining death benefit goes to the beneficiaries. 2. Loan Regime: In a loan-based split-dollar agreement, the employer loans funds to the employee to pay a portion or all of the policy premiums. The employee is responsible for repaying the employer's loan at an agreed-upon interest rate. Upon the insured's death, the employer is primarily entitled to the loan value and any outstanding interest, while the remaining death benefit is paid to the beneficiaries. Both types of agreements guarantee the employee a specific level of death benefit protection while offering potential tax advantages. Since the premium payments made by the employer are considered a loan, they might be tax-free to the employee. Additionally, the growth of the policy's cash value is tax-deferred, increasing the policy's potential estate value. Hawaii Split-Dollar Insurance Agreements with Policies Owned Jointly by Employers and Employees provide flexibility in terms of policy ownership, premium payments, and death benefit distribution. These agreements serve as an attractive employee benefit that can supplement other retirement plans and offer an additional layer of financial security. If considering a Hawaii Split-Dollar Insurance Agreement, it is crucial to consult a knowledgeable professional who can tailor the specific terms of the arrangement to meet the employer's and employee's needs. Proper legal and tax guidance should be sought to ensure compliance with relevant regulations and to maximize the potential benefits of the strategy.