Q. Why Switch-Dollar Life Insurance?

A. Tax Efficient Funding of:

• Estate Taxes
• Other Liquidity Needs
• Business Continuity Plans
• Buy-Sell Agreements
• Charitable Bequests
• Defective Grantor Trust Installment Notes

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• Taxation as Economic Benefit
  (Endorsement) Split-Dollar
  Or
• Taxation as Split-Dollar Loan
  
• Limited Grandfather Protections for:

  • Existing Plans (entered into before Jan. 28, 2002)
  • New Plans (entered into before Final Regs.)
    
• Changes in Term Rates Used to Measure Annual Economic Benefit ("AEB")
  
• Planning Opportunities & Risks
  
• Window of Opportunity for New Plans

 

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INSURANCE

• Insured: Mary Jones (Current Age 70)
  
• Whole Life (Current DB $8.4M)
  
• Corporate Switch-Dollar Plan
  (Collateral Assignment)
  
• Insurance Trust Is Owner & Beneficiary

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1. How will you quantify the multiple tax impacts of the Notice on both existing and new split-dollar plans?
   
2. For existing plans (pre-Jan. 28, 2002 plans), what action do you intend to take, especially to take maximum advantage of the limited grandfather protection provided?
   
3. For new plans (plans adopted after Jan. 28th but before the date of final regs.), what action do you intend to take, especially to take maximum advantage of the window of opportunity that is now open?
   
4. If you advise switching to a loan from a split-dollar plan (existing or new), how will you account for loan interest for income, gift, and generation-skipping tax purposes?
   
5. If you advise against switching to a loan, how will you account for policy equity at rollout for income, gift, and generation-skipping tax purposes?
   
6. What is your exit strategy for the plan design you recommend?