Short Term Reversionary Trust
Definition of "Short term reversionary trust"
Financial instrument established irrevocably for a minimum of 10 years, after which the principal reverts to the grantor upon termination of the trust. A key feature is that earnings from the principal traditionally have been taxed at the beneficiary's tax rate instead of the presumably higher tax rate of the grantor. An example is the CLIFFORD TRUST commonly used to save for a child's college expenses. Another example is the funded irrevocable LIFE INSURANCE TRUST. Under a typical arrangement, a grandparent might establish such a trust to fund premiums for permanent insurance on the life of a son or daughter, with the grandchildren as beneficiaries. At termination of the trust, the grandchildren would have a fully paid policy on their parent's life, and the trust assets would revert to the grandparent. Congress curtailed the tax advantages of short-term reversionary trusts in the Tax Reform Act of 1969 and again in the TAX REFORM ACT OF 1986.
Popular Insurance Terms
Law, in several states, establishing a fund to guarantee benefits under policies issued by insurance companies that become insolvent. ...
Requirement that an individual must withdraw a minimum sum annually from retirement savings that have accumulated on a tax-deferred basis. This withdrawal must begin by April 1 of the year ...
Provision in an insurance policy that states the monetary value of each piece of property to be insured. ...
Standard property-liability insurance premium set by a rating bureau for a particular class of risk. ...
Unfriendly fire not confined to its normal habitat. For example, fire in the fireplace leaps onto the sofa. Property contracts protect against damage from a hostile fire, not from damage ...
Investment risk associated with the relationship between the yield (interest, dividends, and capital) of financial instruments and the rate of inflation in the economy. For fixed income ...
Same as term Mortality Table: chart showing rate of death at each age in terms of number of deaths per thousand. ...
Coverage usually provided as part of the special Multiperil insurance (smp) policy, generally replaced by the commercial package policy, through the attachment of the Blanket Crime ...
Actuarial method of crediting retirement benefits earned and the costs associated with these earned retirement benefits. An increment (unit) of benefit is credited for each year of ...
Have a question or comment?
We're here to help.