Short Term Reversionary Trust
Definition of "Short term reversionary trust"
Financial instrument established irrevocably for a minimum of 10 years, after which the principal reverts to the grantor upon termination of the trust. A key feature is that earnings from the principal traditionally have been taxed at the beneficiary's tax rate instead of the presumably higher tax rate of the grantor. An example is the CLIFFORD TRUST commonly used to save for a child's college expenses. Another example is the funded irrevocable LIFE INSURANCE TRUST. Under a typical arrangement, a grandparent might establish such a trust to fund premiums for permanent insurance on the life of a son or daughter, with the grandchildren as beneficiaries. At termination of the trust, the grandchildren would have a fully paid policy on their parent's life, and the trust assets would revert to the grandparent. Congress curtailed the tax advantages of short-term reversionary trusts in the Tax Reform Act of 1969 and again in the TAX REFORM ACT OF 1986.
Popular Insurance Terms
Coverage for loss in the gross earnings of the business (minus expenses that cease while the business is inoperative) as the result of the interruption of normal business activities caused ...
Casualty losses of high severity. ...
Coverage in property insurance for an employee's lost income if a peril such as fire damages or destroys the place of employment, causing the worker to become unemployed. For example, a ...
Same as term Cancellation Provision Clause: provision permitting an insured or an insurance company to cancel a property and casualty or a health insurance policy (circumstances vary; see ...
Mechanism for providing coverage when the insured's underinsured motorist coverage limit is more than the tort feasor's limit of liability that has been previously reduced by claim payments ...
State legislation that allows insurers to offer both property and casualty insurance. At one time, U.S. insurers sold only one type of insurance, a practice that gradually became written ...
Agreement concerning an insured individual, not the insured's property. A property and casualty insurance contract cannot be assigned, since it follows the insured, not the property. For ...
Trust in which a charity receives income from a donated asset for a specified number of years that it is held in that trust. After the specified period concludes, the principal is ...
Policy that has an initial premium with flexible premiums thereafter. Within limits, a policy owner can select both the future amount and frequency of premiums, or can stop and start ...
Have a question or comment?
We're here to help.