An employer has a collaterally assigned split dollar arrangement with several key managers. There are fully executed agreements specifying the extent of the employers interest which, in this case, is the employers' cummulative premium paid. The employee owns the policy and designates a benficiary. The question is : How well is the employers interest protected should a beneficiary or former employee fail to act as specified in the agreement. For example: A spouse beneficiary at death of the employee claims he/she is entitled to the entire policy proceeds. Are there examples that can be cited of where this has occurred and the employers' position was protected.

This should not be any problem if the employer had a normal collateral assignment agreement in force. This agreement (an additional agreement from the basic split dollar agreement) contains the provisions giving the employer an interest in the policy proceeds. It is also typically on file with the insurance company to prevent just this type of "misunderstanding."

Generally, the collateral assignment is an actual assignment, similar to a lien, filed with the carrier. AT death, the carrier cuts two checks. One to the beneficiary, and the second to the corporation, bypassing the beneficiary.

Generally, the collateral assignment is an actual assignment, similar to a lien, filed with the carrier. AT death, the carrier cuts two checks. One to the beneficiary, and the second to the corporation, bypassing the beneficiary.

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Jim Clary
jclary@mcg-chi.com
(847) 374-1000