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
Addition to a life insurance policy stating that when an insured becomes disabled for at least six months, premiums due are waived. Depending on the rider, the insured may begin to receive ...
Commitment that a lending institution makes to offer a loan at a stipulated interest rate at a predetermined future time, usually limited to 90 days. ...
Life insurance in which the debit system is used to collect premiums on a monthly basis. ...
Provision in a marine insurance policy in which agreement has been reached between the insured and the insurance company concerning the worth of the property that is to be covered under the ...
Coverage for small groups that cannot meet the underwriting standards of true group insurance. Even though the franchise insurance covers an entire group, individual policies are written on ...
Policy that pays a dividend to its owner. ...
Health insurance coverage only for a specified catastrophic disease such as cancer. It is important to ascertain the waiting period required, maximum benefits and maximum length of time ...
cost of annuity based on expectation of life of the annuitant and the expense and profit loadings of the insurance company. ...
Methods of handling policyholder dividends. In a participating life insurance policy, dividends are paid to the policy owner according to which of the following options is selected: applied ...
Have a question or comment?
We're here to help.