Personal-residence Trust
Definition of "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
State operated insurance company used in workers compensation insurance in some states where the risks are so great that the commercial insurance companies cannot operate at affordable ...
Coverage for the insured's personal and real property and the insured's own person. Contrast with third party. ...
Plan wherein total withdrawal or income payments from tax deferred savings plans exceed $150,000 in any one year. An excess distribution tax of 15% of the amount greater than $150,000 must ...
Application of conventional terms and conditions to the reinsurance of a risk. Contrast with non-traditional REINSURANCE. ...
Right of one party to use land owned by another party. For example, an electric utility can obtain an easement through court action to place its power lines across someone's property, even ...
Type of inland marine insurance that covers pipelines. Although pipelines are stationary, the coverage is written on inland marine forms because they are considered part of the ...
Theory that the probability that two independent events will occur is equal to the probability that one independent event will occur times the probability that a second independent event ...
Coverage for an advertiser's negligent acts and/or omissions in advertising (both oral and written) that may result in a civil suit for libel, slander, defamation of character, or copyright ...
Method of premium payment under which a temporary premium is charged based on projected loss experience. At the end of the year this premium is adjusted to reflect the actual loss ...
Have a question or comment?
We're here to help.