Wills, trusts, estate taxes, succession planning, beneficiary planning, and wealth preservation.
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Foundation terms you need to know first (4 terms)
Inherited property refers to real estate received after the death of a property owner, typically through a will, trust, or state law. It presents unique opportunities and challenges for real estate investors.
A death benefit is the sum of money paid to the designated beneficiary or beneficiaries upon the death of an insured person, typically from a life insurance policy. It provides financial protection to loved ones.
The individual or entity legally designated to receive assets, such as real estate, from an estate, trust, or insurance policy upon the owner's death, ensuring a direct and often probate-free transfer.
A settlor is the individual who creates a trust, transferring assets such as real estate into it and defining the terms for how those assets will be managed and distributed for the benefit of others.
Complex strategies and professional concepts (9 terms)
Stepped-up basis is a tax provision that allows the cost basis of an inherited asset, such as real estate, to be adjusted to its fair market value on the date of the decedent's death, significantly reducing or eliminating capital gains tax for the heir upon sale.
Form 706 is the official IRS document used to calculate and report federal estate tax and generation-skipping transfer (GST) tax liabilities for the estates of deceased U.S. citizens or residents, requiring detailed asset valuation and deduction claims.
The Rule Against Perpetuities (RAP) is a common law legal principle that prevents property interests from being tied up indefinitely in the future, ensuring that ownership vests within a specific period to promote alienability.
A Dynasty Trust is an irrevocable trust designed to hold assets for multiple generations, often in perpetuity, shielding them from estate taxes, generation-skipping transfer (GST) taxes, and creditors for the benefit of descendants.
A Family Limited Partnership (FLP) is a legal entity used by high-net-worth individuals to transfer assets to younger generations while retaining control, reducing estate taxes through valuation discounts, and providing robust asset protection.
A Charitable Remainder Trust (CRT) is an irrevocable trust that provides an income stream to the grantor or other non-charitable beneficiaries for a specified term, with the remaining assets distributed to a qualified charity upon the trust's termination.
A Dynasty Trust is an irrevocable trust designed to hold assets for multiple generations, often in perpetuity, shielding them from estate taxes, generation-skipping transfer (GST) taxes, and creditors for the benefit of descendants.
A federal and/or state levy on the transfer of a deceased person's net assets to their heirs, calculated on the fair market value of the estate at the time of death or an alternate valuation date, after specific deductions and exemptions. It is a tax on the right to transfer property, not on the right to receive it.
A Family Limited Partnership (FLP) is a legal entity used by high-net-worth individuals to transfer assets to younger generations while retaining control, reducing estate taxes through valuation discounts, and providing robust asset protection.
A Life Estate is a form of property ownership where an individual (the life tenant) holds the right to possess and use a property for their lifetime, after which ownership automatically transfers to a designated third party (the remainderman).
The Rule Against Perpetuities (RAP) is a common law legal principle that prevents property interests from being tied up indefinitely in the future, ensuring that ownership vests within a specific period to promote alienability.
A critical tax provision that adjusts the cost basis of an inherited asset to its fair market value on the date of the decedent's death, effectively eliminating capital gains tax on appreciation that occurred during the decedent's lifetime.
Stepped-up basis is a tax provision that allows the cost basis of an inherited asset, such as real estate, to be adjusted to its fair market value on the date of the decedent's death, significantly reducing or eliminating capital gains tax for the heir upon sale.
Form 706 is the official IRS document used to calculate and report federal estate tax and generation-skipping transfer (GST) tax liabilities for the estates of deceased U.S. citizens or residents, requiring detailed asset valuation and deduction claims.
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