PRIVATE SPLIT-DOLLAR LIFE INSURANCE AGREEMENT (CROSS-PURCHASE FUNDING) FOR FINANCIAL PROFESSIONAL USE ONLY-NOT FOR PUBLIC DISTRIBUTION. Specimen documents are made available for educational purposes only. This specimen form may be given to a client s attorney for consideration as a sample document, when requested. This specimen form shall not be given to a client. This document should not be used as drafted. It has not been adapted to the specific circumstances or objectives of any individual client, nor has it been prepared to meet the legal requirements of any particular state. Clients should be advised to seek legal counsel when entering into any transaction and in the preparation of all legal documents. All formalities required under applicable local law should be observed. Caution: In September 2003, the Treasury Department and IRS released final regulations governing the federal income, employment and gift taxation of split-dollar life insurance arrangements [T.D. 9092]. The final regulations apply to (1) new split-dollar life insurance arrangements entered into on and after September 18, 2003, and (2) preexisting arrangements that are materially modified on or after September 18, 2003. The final regulations provide some guidance on what actions will and will not be considered material modifications. The guidance provided in IRS Notice 2002-8 [2002-1 C.B. 398], including safe harbor and grandfathering provisions, applies to split-dollar life insurance arrangements entered into on or before September 17, 2003 (unless they are materially modified on or after September 18, 2003). ***** SPLIT-DOLLAR LIFE INSURANCE AGREEMENT This Split-Dollar Life Insurance Agreement (hereinafter Agreement ) is made this (day) of (month), (year), by and between (insert the name of Buy-Sell co-owner), hereinafter referred to as Buy-Sell Beneficiary, and (insert the name of Insured), hereinafter referred to as Insured. ARTICLE I PURCHASE OF LIFE INSURANCE Sample Document - Page 1 of 5
Insured shall apply for and purchase a policy of permanent life insurance on the life of Insured in the initial face amount of $. This insurance policy shall be owned by Insured. ARTICLE II PAYMENT OF PREMIUMS Insured shall pay all premiums on the insurance policy sufficient to keep the insurance policy in force, and shall not exceed guideline premiums. ARTICLE III INSURED S RIGHTS Insured shall own the policy and have all rights of ownership in the policy. These rights may be exercised without the consent of any other party except as otherwise provided herein. Insured shall have the following specific rights in the policy: (1) The right to receive policy loans under the policy loan provisions of the policy, up to but not in excess of Insured s interest in the policy as defined in Article V(2) as of the date of the loan. (2) The right to make cash withdrawals from the policy without the consent of any other party not in excess of Insured s interest in the policy as defined in Article V(2) as of the date of the loan. (3) The right to convey Insured s interest in the policy subject to restrictions as provided in this Agreement. ARTICLE IV BENEFICIARY DESIGNATION Insured may designate a beneficiary or beneficiaries to receive proceeds payable upon the death of Insured, but only as subject to any right or interest Buy-Sell Beneficiary may have in such proceeds as provided in Article V(1) of this agreement. ARTICLE V DEATH BENEFIT The parties agree that the beneficiary designation under the policy shall provide that upon the death of Insured the proceeds of the policy shall be paid as follows: Sample Document - Page 2 of 5
(1) Buy-Sell Beneficiary s Portion of Death Benefit. Buy-Sell Beneficiary shall be paid (insert the amount stated in the Buy-Sell Agreement) as stated in the (insert the Buy-Sell entity name) Buy-Sell Agreement ( Buy-Sell Agreement ) dated (insert the date of agreement). (2) Insured s Portion of Death Benefit. The balance of any amount payable upon the death of Insured, not paid pursuant to Article V(1) above, shall be paid to the beneficiary selected by Insured under the provisions of Article IV above. ARTICLE VI ECONOMIC BENEFIT Buy-Sell Beneficiary is liable for all reportable economic benefit that accrues to Buy-Sell Beneficiary as a result of this agreement. ARTICLE VII TERMINATION OF AGREEMENT Subject to the provisions of the Buy-Sell Agreement, this Agreement may be terminated by either party upon thirty (30) days written notice to the other party. ARTICLE VIII AMENDMENTS TO AGREEMENT This agreement may be altered, amended, or modified only by a written agreement signed by Buy-Sell Beneficiary and Insured, or their respective assignees. In addition, either party may convey that party s rights, interests, and obligations under this Agreement, provided that any such conveyance is made subject to the terms of this Agreement. This Agreement and any amendments to it shall be binding on Buy-Sell Beneficiary and Insured, their heirs, legal representatives, successors and assigns. ARTICLE IX INSURANCE COMPANY NOT A PARTY TO AGREEMENT The (insert the name of life insurance company) is not a party to this agreement. Performance of its contractual obligations in accordance with policy provisions shall fully discharge said company of all liability. ARTICLE X GOVERNING LAW The law of the State of (name) shall govern this agreement. Sample Document - Page 3 of 5
ARTICLE XI ENTIRE AGREEMENT This agreement represents the final and entire agreement between the parties, and supersedes all prior or contemporaneous agreements, express or implied, written or unwritten, concerning the subject matter herein. IN WITNESS WHEREOF, the Parties have set their hands and seals hereunto on the date first above written in (locality), County of (name), State of (name). BUY-SELL BENEFICIARY (typed name of Buy-Sell Beneficiary) INSURED (typed name of Insured) ***** Sample Document - Page 4 of 5
This information is provided by American General Life Insurance Company (AGL) and The United States Life Insurance Company in the City of New York (US Life), members of American International Group, Inc. (AIG). All companies mentioned, their employees, financial professionals, and other representatives, are not authorized to give legal, tax, or accounting, advice, including the drafting or execution of any legal document. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. AGL and US Life shall not be liable for any loss or damage caused by the use of, or reliance on, the tax, accounting, legal, investment or financial items contained in this material. FOR FINANCIAL PROFESSIONAL USE ONLY-NOT FOR PUBLIC DISTRIBUTION 2014. All rights reserved. Sample Document - Page 5 of 5