Personal-residence Trust
Trust in which a home is transferred directly to the children while the parent (s) remain in the home for a fixed period of time, resulting in a substantially reduced estate tax cost. These trusts have a great flexibility in that the home in trust may be sold during the term of the trust, provided the proceeds from the sale is reinvested in another home within two years of the sale of the home. The primary drawbacks of this trust are that if the parent (s) die before the term of the trust expires, the home is included in the estate of the parent (s), and if the parent (s) outlive the term of the trust and has a desire to remain in the home, the parent (s) must rent that home from the children at its fair market value.
During the term of the trust, the parent (s) has the right to the income from the trust's property as well as the use of that property. As such, income and expenses associated with that property are reported on the income tax return of the parent (s). If the parent (s) is still alive at the time the term of the trust expires, the interest in the home that is transferred to the children is valued as a remainder interest. The tax advantage results from this remainder interest as the remainder interest in the home is valued at a substantially lower value for federal tax purposes than the full market value of the home.
Popular Insurance Terms
Additions or subtractions of a mortality table to reflect changing levels of mortality due to advancement in medicine, geriatrics, and sanitation. These adjustments make a mortality table ...
Provision in business interruption insurance that excludes coverage for continuing the wages of rank and file employees. Business interruption insurance covers an employer for loss of ...
Retirement payments to be credited for future years of service with an employer. ...
Coverage in health insurance by two or more policies for the same insured loss. In such a circumstance, each policy pays its proportionate share of the loss, or one policy becomes primary ...
Insurance facility composed of many different syndicates, each specializing in a particular risk; for example, hull risks. Lloyd's provides coverage for primary jumbo risks as well as ...
Employee benefit program that emphasizes the pursuit of a lifestyle that minimizes the occurrence of sickness through an organized program of preventive medicine. Such a program includes ...
Section providing protection in four areas: Coverage A (Home) the structure of the home (basic contract amount). Other property coverages in Section I are expressed as a percentage of ...
Coverage under which the face value, premiums, and plan of insurance can be changed at the discretion of the policy owner in the following manner, without additional policies being issued: ...
Measure used in the retrospective rating method for workers compensation insurance. A factor is applied to the incurred losses during the rating period in question in order to generate a ...
Have a question or comment?
We're here to help.