The Death Benefit Only Plan for Non-Profits

The co-ownership agreement would set forth the terms of the restrictive endorsement and the timing of its release. The employee will own the policy, the co-ownership agreement of the Plan will provide access to the policy by the employee, and the actuarial cost of the current death benefit will be deductible by the employer and not taxable to the employee. The economic benefit of the death benefit coverage will also be taxable to the employee. Any monies contributed by the employee or otherwise taxable to the employee will be a credit against the employee's economic benefit taxation. The Non-Profit executive bonus received by the employee is in the form of permanent life insurance owned by the employee. The life insurance policy can be continued after the employee's disability or retirement. The employee's named beneficiary may receive the life insurance proceeds income tax-free.

The cash value of a permanent life insurance policy grows on a tax-deferred basis. Because the Co-Ownership Agreement will lapse at, or prior to, the employee's retirement, the executive will have access to the policy's cash value during retirement. Withdrawals from the policy can be made on an income-tax free basis up to cost basis. Policy loans can also be taken without income tax consequences.