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.
The Gift Tax is a federal tax imposed on the transfer of property or money from one individual to another without receiving full consideration in return. It applies to gifts exceeding the annual exclusion limit and is primarily the responsibility of the donor.
Gifting property is the transfer of real estate ownership from one party to another without financial consideration, primarily used for estate planning or family support, with significant tax and legal implications.
The total fair market value of all assets an individual owns or has certain interests in at the time of their death, before any deductions or liabilities are considered. It's crucial for estate planning and determining potential estate tax liabilities.
A High-Net-Worth Individual (HNWI) is a person or a household with a significant amount of liquid financial assets, typically defined as having at least $1 million in investable assets, excluding their primary residence.
Inheritance tax is a state-level tax levied on the value of assets inherited by beneficiaries from a deceased person's estate, paid by the recipient rather than the estate itself.
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 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).
A contract where an insurer pays a death benefit to beneficiaries upon the insured's death, in exchange for premiums. For real estate investors, it's a vital tool for risk management, wealth transfer, and leveraging cash value for investment opportunities.
Premature death in real estate investing refers to an investor's unexpected passing before their financial and estate plans are fully established, leading to potential financial, operational, and legal challenges for their real estate portfolio and heirs.
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.
Probate is the legal process of proving a will's validity, settling a deceased person's estate, and distributing assets to heirs or beneficiaries under court supervision. It ensures proper asset transfer and debt settlement.
A real estate trust is a legal arrangement where a property owner transfers title to a trustee, who holds and manages the property for the benefit of designated beneficiaries, offering advantages like privacy, asset protection, and streamlined estate planning.
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