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
Return of a pro rata portion of an agent's commission for a policy that is canceled prior to its expiration date. A commission is paid to an agent in the expectation that the premium will ...
Approach in loss prevention placing emphasis on physical features of the workplace as a potential cause of injuries. For example, if a product is inherently dangerous in design or during ...
Period of time after the expiration of a claims made basis liability coverage policy during which claims may be made. ...
Requirement of an employer to report annually to the U.S. Treasury Department the names of employees who terminated employment with vested benefits, and the amount of the benefits. The ...
Coverage of the employer for all employees on a blanket basis, with the maximum limit of coverage applied to any one loss without regard for the number of employees involved. Both ...
Provisions, usually requiring an additional premium, that are appended to an insurance contract. These include waiver of premium (WP), disability income (DI), accidental death clause, ...
Stipulation that every participant in health care has the right according to law to purchase health insurance from a private insurance entity. The participant's purchase is voluntary and ...
Life insurance rate determined by the valuation of company policy reserves. State regulators set strict standards for policy reserves to make certain that life insurers will have enough ...
Form that provides coverage for a business whose inventory has fluctuating values during the year. The amount of insurance coverage is adjusted monthly, quarterly, or annually to reflect ...
Have a question or comment?
We're here to help.