The U.S. Tax Court has issued a taxpayer-favorable ruling on a split-dollar life insurance arrangement. A woman created an estate plan that included a revocable grantor trust and an irrevocable insurance trust that purchased split-dollar life insurance on the lives of her daughter and son-in-law with money she borrowed. The insurance trust gave the woman a receivable for the cash. The IRS argued that the split-dollar life insurance was includible as part of her taxable estate. The U.S. Tax Court disagreed and ruled that the cash-surrender value of the life insurance policies shouldn’t be included in the estate. (Levine, 158 T.C. No. 2)
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