Collateral Split-Dollar Release is the process of unwinding a collateral assignment split-dollar arrangement, usually when the underlying loan or economic benefit structure has achieved its purpose or needs to be terminated. In a typical collateral assignment design, an employee or trust owns a life policy and collaterally assigns it to an employer to secure repayment of premiums or loans. A release occurs when the employerTMs interest is repaid or otherwise satisfied, and the collateral assignment is removed, leaving the policy fully in the hands of the employee or trust. Proper documentation is essential to avoid future disputes or unintended tax consequences.

Advisors manage collateral split-dollar releases by coordinating with employers, plan administrators, and carriers to confirm loan balances, repayment terms, and final ownership. Legal counsel prepares release documents and updates collateral assignments with the insurer. In estate and executive-benefit planning, release often occurs at retirement or after a predetermined event, shifting full policy value to the insured or trust. Advisors must track timing, document fair value exchanges, and coordinate with tax professionals. Understanding collateral split-dollar release helps advisors close the loop on sophisticated benefit arrangements without creating avoidable tax or legal issues.