Personal-residence Trust
Definition of "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
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 ...
Coverage against a loss resulting from the forcible entry of a safe. In order for this coverage to be applicable, there must be signs of forcible entry into the premises in which the safe ...
Endorsements to life insurance policies that provide additional benefits or limit an insurance company's liability for payment of benefits under certain conditions. These include: Waiver of ...
Policy that combines life insurance coverage on two lives and pays policy proceeds on the second person's death with the accumulation potential of an underlying variable investment ...
Coverage on an all risks basis for fur garments belonging to customers of a furrier. ...
1961 federal legislation that allows the U.S. Export-Import Bank to set up insurance protection for U.S. exporters against credit risk and political risk in order to help make U.S. exports ...
Decline in an estate's value, when the estate owner dies, because of death-related expenses to include estate taxes, estate administration costs, funeral expenses, and outstanding estate ...
Status in which an insurance company holds funds of its insureds (the payment of premiums) in trust, and through an insuring agreement promises to make all benefit payments for which it has ...
Property coverage for a builder of ships until possession passes to the owners. Protects against pre-launch and post-launch perils. Coverage can be purchased on an all risks basis subject ...
Have a question or comment?
We're here to help.