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 reverse mortgage allows homeowners, typically seniors aged 62 or older, to convert a portion of their home equity into tax-free cash without having to sell their home or make monthly mortgage payments. The loan is repaid when the last borrower leaves the home permanently.
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.
An individual or entity designated to receive assets or benefits from an investment, trust, or insurance policy if the primary beneficiary is unable or unwilling to do so, ensuring continuity in wealth 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.
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.
A successor trustee is an individual or entity designated in a trust agreement to assume the management and distribution of trust assets upon the death, resignation, or incapacity of the initial trustee.
The portion of a deceased person's estate that is subject to federal and/or state estate taxes after all allowable deductions and exemptions have been applied. It represents the net value of assets upon which estate tax is levied.
A legal instrument allowing a property owner to transfer real estate to a designated beneficiary upon their death, bypassing probate while retaining full ownership and control during their lifetime.
A trustee is an individual or entity legally entrusted with managing assets or property for the benefit of another party (the beneficiary) under the terms of a trust agreement, upholding strict fiduciary duties.
The Unified Credit is a federal tax credit that offsets gift and estate taxes, allowing individuals to transfer a certain amount of wealth tax-free during their lifetime or at death.
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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