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
Statement by an auditor or certified public accountant indicating if a company's financial statements fairly present its true financial condition. A statement of opinion may be unqualified, ...
Group that, with the exception of the government, establishes the standards for all financial accounting and reporting for the various entities in the United States. The standards enable ...
Statutory liabilities minus the interest MAINTENANCE RESERVE minus the ASSET VALUATION RESERVE. ...
Provision that covers a business to be protected under a reinsurance treaty. The class either can appear at the beginning of the agreement or may be included in the retention and limits ...
Amount expressed as a liability on the insurance company's balance sheet for benefits owed to policy owners. These reserves must be maintained according to strict actuarial formulas as they ...
Life insurance policy given by a donor to a charity; donor only relinquishes the cash value and the cost of the premiums previously paid. The receiving charity's future value of the life ...
Time interval between the date benefits end under Social Security and the date these benefits resume. For example, survivor benefits are paid only as long as the parent (if less than age ...
Action by the owner of a cash value policy to relinquish it for its cash surrender value. Since the depression of the 1930s, companies have reserved the right to delay payment of a cash ...
Means of borrowing at no charge by a policyowner under universal life insurance policies. ...
Have a question or comment?
We're here to help.