Split-dollar life insurance is enjoying a renewed interest from applicable tax-exempt organizations (ATEOs) because ATEOs must now pay a 21 percent excise tax on compensation paid to covered employees in excess of $1 million. This may not sound like something that would affect many tax-exempt organizations, yet because of the unique way covered employees must recognize deferred-compensation income, it has greatly increased the tax-exempt organizational motivation to find alternative reward programs for high earners. Split-dollar life insurance has been presented by many practitioners as a suitable alternative.
Author: Douglas B. Richards, JD, MBA, CLU, CFP, is senior advanced markets consultant at LPL Financial in Fort Mill, South Carolina. .
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