Trusts and Estates > Insurance > Discount Private Split-Dollar Does It Work?

Discount Private Split-Dollar Does It Work?

May 1, 2008 12:00 PM, By Donald O. Jansen & Charles L. Ratner

By: By Donald O. Jansen & Charles L. Ratner

Do you think that split-dollar arrangements (other than premium loans under the split-dollar loan regime) faded away when the Internal Revenue Service tightened the rules on them in the final regulations issued Sept. 17, 2003?¹ Think again. New variations of the split-dollar technique keep appearing.

Discount private split-dollar — also known as “three-generation split-dollar” — is one of the popular new techniques. Promoted around the country in recent years, it involves a private split-dollar arrangement that subjects the premium payer's rights to severe restrictions intended to significantly reduce the value of his interest in the arrangement for gift and estate-tax purposes. In essence, discount private split-dollar is supposed to be both a premium financing technique and a wealth transfer technique.

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