--- title: Split Dollar Utilizing Life Insurance | A Strategy for Business Owners description: Split Dollar is an attractive way for business owners to utilize life insurance. Business owners can save taxes now and get tax-deferred income later with a split dollar plan. image: https://blog.advisors-resource.com/hubfs/Split-Dollar-2.jpg --- [Skip to content](https://blog.advisors-resource.com/blog/split-dollar-utilizing-life-insurance#main-content) ![advisors-resource-company-logo-horizontal-full-color-green-1](https://blog.advisors-resource.com/hs-fs/hubfs/advisors-resource-company-logo-horizontal-full-color-green-1.png?width=150&height=65&name=advisors-resource-company-logo-horizontal-full-color-green-1.png) - [Home](https://advisors-resource.com/) - [Who we Serve](https://advisors-resource.com/who-we-serve/) Show submenu for Who we Serve - [CPAs](https://advisors-resource.com/cpas/) - [Business Owners](https://advisors-resource.com/business-owners/) - [Financial Professionals](https://advisors-resource.com/financial-professionals/) - [Webinars & Blogs](https://advisors-resource.com/webinars-case-studies/) Show submenu for Webinars & Blogs - [Our Blog: Industry Insider](https://blog.advisors-resource.com/blog) - [Webinars](https://advisors-resource.com/webinars-case-studies/) - [Contact](https://advisors-resource.com/contact-us/) Open main navigation Close main navigation - [Home](https://advisors-resource.com/) - [Who we Serve](https://advisors-resource.com/who-we-serve/) Show submenu for Who we Serve - [CPAs](https://advisors-resource.com/cpas/) - [Business Owners](https://advisors-resource.com/business-owners/) - [Financial Professionals](https://advisors-resource.com/financial-professionals/) - [Webinars & Blogs](https://advisors-resource.com/webinars-case-studies/) Show submenu for Webinars & Blogs - [Our Blog: Industry Insider](https://blog.advisors-resource.com/blog) - [Webinars](https://advisors-resource.com/webinars-case-studies/) - [Contact](https://advisors-resource.com/contact-us/) Aug 5, 2022 11:00:00 AM # Split Dollar Plan Utilizing Life Insurance \[2026 Update\] ![Picture of Jordan Pence](https://app.hubspot.com/settings/avatar/59c5c149de751f6daed462d84605c4a6) [Jordan Pence](https://blog.advisors-resource.com/blog/author/jordan-pence) Share: [facebook-f icon](http://www.facebook.com/share.php?u=https://blog.advisors-resource.com/blog/split-dollar-utilizing-life-insurance) [linkedin-in icon](http://www.linkedin.com/shareArticle?mini=true&url=https://blog.advisors-resource.com/blog/split-dollar-utilizing-life-insurance) [Twitter icon](https://twitter.com/intent/tweet?url=https://blog.advisors-resource.com/blog/split-dollar-utilizing-life-insurance) [pinterest-p icon](http://pinterest.com/pin/create/link/?url=https://blog.advisors-resource.com/blog/split-dollar-utilizing-life-insurance) [envelope icon](mailto:?body=https://blog.advisors-resource.com/blog/split-dollar-utilizing-life-insurance) Now that the flat tax rate for C-Corporations has reduced to 21% (from as high as 35%) thanks to the Tax Cuts & Jobs Act, split dollar plans have once again become an attractive solution for business owners, and high-income earners. Simply put, a split dollar plan utilizing life insurance (which is a crucial factor that I will explain) can help business owners save taxes now and leverage low corporate taxes while allowing them to access tax-free income later. ### **Split Dollar Advantages** It’s no secret that a split dollar plan benefits not only key-employee(s), but even more so a business owner. [A split dollar plan](https://lp.advisors-resource.com/split-dollar-case-study) provides business owners with the flexibility to choose a key-employee(s) or just for themselves as well as the versatility to have a different benefit for each. A split dollar plan is relatively easy to establish (IRS approval is not required, and administration is minimal.) Additionally, the plan’s cost basis is treated as an asset of the business. In other words, the life insurance policy cost basis is an asset on the business’ balance sheet, and the cash value growth is owned by the participant on a tax-deferred basis. ### **Who is a Fit?** Before we get into why one would implement a split dollar plan utilizing life insurance, let’s cover who is a fit for this type of strategy (trust me, this won’t take long). Your clients or prospects who are a fit for a split dollar plan should have two key characteristics: - They have an annual income of $500,000+ OR owns a C-Corp - Are under 60 years of age It’s that easy. Now, why life insurance? ### **Why Life Insurance?** There are 4 main reasons why I would recommend utilizing life insurance in a split dollar plan: 1. Life insurance allows flexible participation and contributions - Ability to choose who will participate - No government restrictions on contributions 2. Life insurance has a small impact on the business balance sheet - Maintain balance sheet stability - Control timing of funds moving on or off the balance sheet 3. Life insurance minimizes their personal out-of-pocket and tax cost - Tax efficient programs for the contribution, accumulation, and distribution phases of the plan 4. Life insurance provides the potential to accumulate funds for retirement - Potential for tax-free income - Alleviates concern of outliving income sources What features does life insurance have that allow it to serve in these 4 key-areas? Cash value life insurance, specifically indexed universal life (IUL) insurance, is a powerful tool that can be used to grow funds without significant tax consequences because IUL products: - Have income-tax-deferred growth of values - Are not subject to IRS contribution limits - Do not have a 10% penalty for early access - Do not have Required Minimum Distributions (RMDs) - Are creditor protected (in most states) - Have an income-tax-free death benefit   [Business](https://blog.advisors-resource.com/blog/tag/business), [Business Owner](https://blog.advisors-resource.com/blog/tag/business-owner), [Life Insurance](https://blog.advisors-resource.com/blog/tag/life-insurance), [Insurance](https://blog.advisors-resource.com/blog/tag/insurance), [Non-Qualified Plans](https://blog.advisors-resource.com/blog/tag/non-qualified-plans), [Retirement](https://blog.advisors-resource.com/blog/tag/retirement), [Tax](https://blog.advisors-resource.com/blog/tag/tax) ## Related posts [![](https://blog.advisors-resource.com/hs-fs/hubfs/Split%20Dollar.jpg?height=200&name=Split%20Dollar.jpg)](https://blog.advisors-resource.com/blog/split-dollar-is-back) [Business](https://blog.advisors-resource.com/blog/tag/business), [Business Owner](https://blog.advisors-resource.com/blog/tag/business-owner), [Life Insurance](https://blog.advisors-resource.com/blog/tag/life-insurance), [Insurance](https://blog.advisors-resource.com/blog/tag/insurance), [Non-Qualified Plans](https://blog.advisors-resource.com/blog/tag/non-qualified-plans), [Retirement](https://blog.advisors-resource.com/blog/tag/retirement), [Tax](https://blog.advisors-resource.com/blog/tag/tax) ## [Split Dollar is Back](https://blog.advisors-resource.com/blog/split-dollar-is-back) ![Picture of Jordan Pence](https://app.hubspot.com/settings/avatar/59c5c149de751f6daed462d84605c4a6) [Jordan Pence](https://blog.advisors-resource.com/blog/author/jordan-pence) Oct 18, 2019 10:31:16 AM The Tax Cuts and Jobs Act of 2017 (TCJA) has brought substantial changes to all areas of federal... [Read more](https://blog.advisors-resource.com/blog/split-dollar-is-back) [![](https://blog.advisors-resource.com/hs-fs/hubfs/Split-Dollar.jpg?height=200&name=Split-Dollar.jpg)](https://blog.advisors-resource.com/blog/split-dollar-plan-utilizing-life-insurance) [Taxes](https://blog.advisors-resource.com/blog/tag/taxes), [Insurance](https://blog.advisors-resource.com/blog/tag/insurance), [Split Dollar](https://blog.advisors-resource.com/blog/tag/split-dollar) ## [Split Dollar Plans: The Tax-Advantaged Strategy Your Business-Owner Clients Are Missing](https://blog.advisors-resource.com/blog/split-dollar-plan-utilizing-life-insurance) ![Picture of The Advisors Resource Team](https://blog.advisors-resource.com/hs-fs/hubfs/advisors-resource-company-profile-image-green-white.jpg?width=50&name=advisors-resource-company-profile-image-green-white.jpg) [The Advisors Resource Team](https://blog.advisors-resource.com/blog/author/the-advisors-resource-team) May 14, 2026 3:23:57 PM A split dollar plan using life insurance can help your clients reduce taxes today, protect their... [Read more](https://blog.advisors-resource.com/blog/split-dollar-plan-utilizing-life-insurance) [![Tax Strategies for Business Owners](https://blog.advisors-resource.com/hs-fs/hubfs/Tax-Strategies-for-Business-Owners.jpg?height=200&name=Tax-Strategies-for-Business-Owners.jpg)](https://blog.advisors-resource.com/blog/top-3-tax-strategies-for-business-owners-2022-update) [Business Owner](https://blog.advisors-resource.com/blog/tag/business-owner), [Taxes](https://blog.advisors-resource.com/blog/tag/taxes), [cash value life insurance](https://blog.advisors-resource.com/blog/tag/cash-value-life-insurance) ## [Top 3 Tax Strategies for Business Owners \[2022 Update\]](https://blog.advisors-resource.com/blog/top-3-tax-strategies-for-business-owners-2022-update) [Travis Pence](https://blog.advisors-resource.com/blog/author/travis-pence) Apr 1, 2022 11:30:00 AM Tax Day is just around the corner. Which means there’s no better time than now to discuss tax... 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