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
Maximum limit of liability of an insurance company for a particular claim or kind of loss that is applicable in general to all such claims or losses. This maximum limit of liability is ...
Share of a variable dollar annuity paid to an annuitant as an income payment. ...
Provision in a property, liability, or health insurance policy stipulating the extent of coverage in the event that other insurance covers the same property. ...
Type of employee savings plan under which an employee may contribute up to a specified percentage of the salary on an after-tax basis and the employer matches the employee's contribution up ...
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 ...
The term mutually exclusive defines an instance when the occurrence of a specific event makes the emergence of another event impossible. Then, two or more things can be described as ...
pool that contains various reinsurance companies with each sharing reinsurance contracts on a pro rata basis as they are submitted to the pool. market that operates much like the New York ...
Provision in an umbrella liability insurance policy under which the policy will pay those losses that come within the retention limits of the primary policy, but the primary policy cannot ...
Act first passed in 1962 that permits the self-employed individual to establish his or her own retirement plan. This individual can make nondeductible voluntary contributions and ...
Have a question or comment?
We're here to help.