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
Deleveraging of the insurance company's balance sheet. ...
Insurance that offers blanket coverage up to a certain dollar amount on all property of the classification covered by the policy. Floater policies, which cover property wherever it happens ...
Model state statute that governs terms for surrender of individual deferred annuities and cash value life insurance. This model, adopted by most states in the late 1970s and early 1980s, ...
Duration of a policy. Property and casualty coverages are usually written for one year, although a personal automobile policy can be for six months. Life insurance can be written on a term ...
Attachment to an insurance policy to complete its coverage. For example, the Standard Fire Policy must have certain forms attached for it to provide the coverage desired. ...
Same as term cash surrender value: money the policyowner is entitled to receive from the insurance company upon surrendering a life insurance policy with cash value. The sum is the cash ...
Same as term Maximum Foreseeable Loss: worst case scenario under which an estimate is made of the maximum dollar amount that can be lost if a catastrophe occurs such as a hurricane or ...
Policy clause that excludes coverage for loss of property if the cause of the loss cannot be identified. Mysterious disappearance is an exclusion in a standard inland marine insurance ...
Coverage for paintings, pictures, etchings, tapestries, art glass windows, antique furniture, coin collections, and stamp collections owned by individuals and businesses. These works are ...
Have a question or comment?
We're here to help.