Mar 1, 2008 12:00 PM

By Charles L. Ratner & Lawrence Brody & Mary Ann Mancini

Ever since the Internal Revenue Service issued Notice 2001-10¹ in January of 2001, planners who advise clients on their split-dollar life insurance arrangements have had to deal with a Byzantine set of rules that yield different answers depending on the type of arrangement, when it was implemented, and if amended (also when). With the passage of Internal Revenue Code Section 409A and the issuance of Notice 2007-34,² planners have to deal with a whole new set of additional complications.

Notice 2007-34, issued April 10, 2007, accompanied publication of the final Section 409A regulations. The notice provides guidance on the application of Section 409A³ to employment-related split-dollar life insurance arrangements. In short, the IRS has concluded that some, but not all, employer-sponsored split-dollar arrangements are deferred compensation arrangements. While the language of Notice 2007-34 leaves room for interpretation, one thing is clear: Employers, both public and private, who have relied on the “no inference” language of Notice 2002-8⁴ to stay the course with their pre-final regulation equity, collateral assignment split-dollar arrangements to their surprise — and dismay — now must revisit that decision. Once again, these employers might conclude that no action is necessary or even advisable. But there is enough at stake here, especially when those split-dollar arrangements involve irrevocable life insurance trusts, to take a close look at this whole new set of issues for compensatory arrangements.

Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

E-Newsletter Signup

2011 Trust Glossary

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

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