Definition
Incident of Ownership refers to a term used in estate planning and taxation to denote the elements of ownership or degree of control a person has over a property. This is particularly significant when determining whether a transferred property should be included in the grantor’s gross estate for estate tax purposes. If the grantor retains certain control or ownership elements over a transferred property, it may still be considered part of the grantor’s estate.
Examples
Retained Life Interest: If a grantor transfers a property into a trust but retains the right to live in the property, this retained life interest is an incident of ownership.
Right to Revoke: If the grantor has the right to revoke or alter the trust’s terms, this control is also an incident of ownership.
Pledge of Insurance Policies: Holding the right to change beneficiaries or borrowing against the policy cash value in a life insurance policy indicates incidents of ownership.
Frequently Asked Questions
1. How does incident of ownership affect estate taxes?
If the grantor retains incidents of ownership over a transferred property, it may result in the property’s inclusion in the gross estate, thus affecting estate taxes.
2. What kind of control constitutes an incident of ownership?
Any retained rights such as income, revocation, amendment, or possession of property suggest incidents of ownership.
3. Can incidents of ownership be completely transferred?
Yes, incidents of ownership can be completely transferred to remove the property from the grantor’s estate.
Related Terms
- Grantor: The person who creates a trust or transfers property.
- Gross Estate: The total value of an individual’s property and assets before liabilities and taxes.
- Estate Tax: A tax on the transfer of the estate of a deceased person.
- Trust: An arrangement in which one party holds property for the benefit of another.
Online References
Suggested Books for Further Studies
- “Estate Planning for Dummies” by N. Brian Caverly and Jordan S. Simon.
- “Wills, Trusts, and Estate Administration” by Dennis R. Hower and Peter Kahn.
- “Estate Planning Basics” by Denis Clifford.
- “The Tools and Techniques of Estate Planning” by Stephan R. Leimberg.
Fundamentals of Incident of Ownership: Estate Planning Basics Quiz
Thank you for exploring the intricate details and planning guidelines of incidents of ownership and tackling our knowledge assessment quiz. Keep sharpening your knowledge in estate planning!