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
Those states requiring insurers to obtain prior approval rating of rates and policy forms before they use them. Although most states once fell into this category, many followed the lead of ...
Conversion of form of ownership from a mutual insurance company to a stock insurance company. Interest in demutualization of life insurance companies surged in the early 1980s among many ...
Gain that occurs when the move in the underlying asset in one direction is similar to the loss when the underlying asset moves in the opposite direction. For example, if a stock goes up by ...
Fund that comes into existence because premiums for ordinary life insurance policies in their early years are higher than necessary for the pure cost of protection. These excess premiums, ...
Organization of inland marine insurance underwriters. ...
Major credit insurer of the early 20th century that merged into the London Guarantee and Accident Co. in 1931. ...
Base upon which a mortality table is built by beginning with a randomly selected group of people who are alive at the earliest age for which statistics are available on the number of people ...
Provision in an umbrella liability insurance policy under which the policy will pay those losses that come within the retention limits of the primary policy, but the primary policy cannot ...
Distribution of assets if a pension plan is terminated. The allocation is made by either: refunding all of an employee's contributions, plus interest; establishment of classes of employees ...
Have a question or comment?
We're here to help.