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
Membership organization representing professional actuaries in all insurance fields in Canada including life and health, casualty, consulting and fraternal actuaries. A member must reside ...
Type of court bond filed on behalf of the defendant and used to release assets to him or her that have been attached pending a court decision. ...
Device that enables the health maintenance organization (HMO) to present a premium quotation to the employer that would encourage the employer to replace the current health carrier. The POS ...
In homeowners insurance, usually an 80% coinsurance requirement, which means the insured must carry insurance on the value of a home on a replacement cost basis of at least 80%. For ...
Individual retirement account established under the tax reform act of 1986, for a spouse who has unearned income. The maximum annual combined contribution into the worker's and spouse's IRA ...
Agents' records showing when clients' policies expire. ...
Coverage issued to a creditor on the lives of debtors for outstanding loans. If a debtor dies before repayment, the policy pays the remainder of the loan to the creditor. The contract ...
Collection of numbers to record and analyze data such as occurrences of events and particular characteristics. Statistics are absolutely vital to all elements of insurance. In life and ...
Coverage for a tenant with a favorable lease (enabling the lessee to rent premises for less than the market value). If the lease is canceled by the lessor because an insured peril (such as ...
Have a question or comment?
We're here to help.