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Split-dollar life insurance transactions can be an efficient technique1 to fund large life insurance death benefit amounts outside the insured’s estate even after the Treasury Regulations Sections 1.61-22 and 1.7872-15 were enacted in 2003. If the current higher exemption isn’t extended beyond its scheduled sunset at the end of 2025, or is reduced earlier, many more estates would benefit from the infusion of insurance liquidity that split dollar can efficiently facilitate.2
Two Regimes
The regulations provide for two regimes for split-dollar transactions: (1) economic benefit; and (2) loan.3 Under the economic benefit regime, the measure of a grantor’s annual gift is the economic benefit of the net death benefit coverage of the policy for...
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