spousal remainder trust

Spousal remainder trust

A fixed-term trust from which income is distributed to the beneficiary (such as a child of the grantor) to take advantage of a lower tax bracket, and that at the end of the term passes to the grantor's spouse.

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Spousal Remainder Trust

A term trust into which the grantor deposits assets that produce income. The income passes to the beneficiary for a certain number of years, after which the assets go to the grantor's spouse. The income from the assets are taxed at the beneficiary's marginal tax rate unless the beneficiary is under 14 years old, in which case it is taxed at the grantor's rate. See also: Q-TIP.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

spousal remainder trust

An irrevocable trust that may be set up for any length of time in order to pass assets to a spouse. Between the time that the trust becomes effective and the time that the assets are passed, income earned by the trust is taxable to a named beneficiary at the beneficiary's tax rate.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.