An economic benefit crawl out is simply a contributory collateral assignment split-dollar arrangement in which the REB payments made by the policy owner are considered to reduce the collateral assignee’s interest. In the authors’ opinion this strategy is unlikely to pass IRS muster. When the policy owner pays the REB cost each year, it is paying for that year’s death benefit protection that is being provided. To also use the REB payment to reduce the collateral assignee’s interest would appear to constitute double dipping. Using an economic benefit crawl would be akin to paying interest on a loan and claiming that the interest payment also reduces the outstanding loan balance.
Visit Lifequotes to view our wide array of policies.
Reproduced with permission. Copyright The National Underwriter Co. Division of ALM