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A transfer tax can also apply to transferring cash or other types of assets as a way to pass on wealth to family members. For example, a parent might want to pass on an inheritance to their children, but depending on how much they leave in their estate, that transfer could be taxed. A transfer tax can be assessed by different types of governments, such as when city or county governments impose real property transfer taxes or when the federal government imposes transfer taxes related to passing on assets to heirs....

Definition and Example of a VA Loan A VA loan is a mortgage that’s available to veterans, military members, and their spouses. They can be used to buy a home, improve on an existing home, or refinance a current mortgage. These home loans come with a guarantee from the Department of Veterans Affairs. The VA will repay the lender if the borrower defaults on their loan. This extra protection for the lender encourages better terms and interest rates compared to many other loan programs....

Assigned risk plans aren’t for every car owner who’s been rejected for coverage, though. Follow along to learn how an assigned risk plan works, who needs one, and how to qualify for better coverage in the future. What Is an Assigned Risk Plan? All states require automobile owners to carry minimum levels of liability insurance, and some also require other coverages such as personal injury protection and uninsured/underinsured motorist. But the standard insurance market—known as the voluntary market—can refuse to insure drivers it deems to have too many risk factors, such as a lack of driving experience or a bad driving record....

How Being an Expatriate Works An expatriate is a taxpayer who has renounced their U.S. citizenship or has abandoned their green card. The IRS requires an expatriate to file Form 8854, certifying that they satisfied their tax obligations for the five years before their expatriation date. If they did not meet the requirements, the taxpayer is subject to the expatriation tax. Different expatriation tax rules can apply depending on the date of expatriation, the taxpayer’s net worth, and income....

Hinterhaus Productions / Getty Images Revocable: A revocable beneficiary can be changed at any time by the policy owner. Irrevocable: An irrevocable beneficiary must agree to any changes in the policy, including their removal as the beneficiary. An irrevocable beneficiary is a named recipient of a life insurance policy’s proceeds who controls whether any changes can be made to the beneficiary of the policy. If the beneficiary is revocable, then the policy owner controls the changes....

While option adjustable-rate mortgages can offer payment flexibility for homebuyers, there are some important drawbacks to note. Definition and Examples of Option Adjustable-Rate Mortgages An option adjustable-rate mortgage is an adjustable-rate mortgage that features several payment options. Option ARM loans are not as popular as they once were. Alternate name: Option payment ARM, payment-option ARM, pay option ARM It helps to know about the basics of adjustable-rate mortgages to understand option ARMs....

For example, a pension plan might owe $10 billion in employee benefit payments, but only have $5 billion in current assets. That means it has only a 50% funded status. Alternate names: Unfunded pension plan, unfunded pension liability Both public and private pension plans can be underfunded, and these shortfalls can affect more than just retirees. Underfunded state pension plans, for example, could lead to shifts in taxes and/or public spending that affects the general population....

Alternate names: white-label banking, private-label financial services Acronym: BaaS One example of a non-bank business providing banking as a service would be an airline that offers credit cards under its own brand, such as Southwest Airlines’ Southwest Rapid Rewards Priority Visa Card. Another example of banking as a service would be Chime, an online banking platform that provides checking and savings accounts via the Bancorp Bank and Stride Bank. How Banking as a Service Works In traditional banking, a banking license is required as is following strict government regulations....

Many investors use their brokerage accounts to buy stocks, bonds, and other investments directly. Investors can also purchase other types of securities in their brokerage, like derivatives such as options. This gives you the right but not the obligation to sell certain securities or futures, which requires that the buyer buy the securities by a certain date. When you open a position in options or futures, you are buying to open....

According to the Tax Policy Center, “carried interest, income flowing to the general partner of a private investment fund, often is treated as capital gains for the purposes of taxation. Some view this tax preference as an unfair, market-distorting loophole. Others argue that it is consistent with the tax treatment of other entrepreneurial income.” In a typical scenario, about 80% of carried interest eventually trickles down to the fund’s limited partners, those who initially invested capital....

Leaving your loved ones to deal with an outstanding mortgage, credit cards, student loans, or other debts can create an undue financial burden. Credit life insurance, also known simply as credit insurance, is designed to help reduce that burden, although it may not be appropriate for every estate plan. Learn more about whether credit life insurance is the right choice for you. What Is Credit Life Insurance? Credit life insurance is insurance that’s intended to pay off a borrower’s debts at their death....

Find out more about debt financing, how it works, and the advantages and disadvantages of using this method to run your business. Definition and Examples of Debt Financing Debt financing is what happens when a business borrows money in order to operate, rather than raising money from investors—which is called equity financing. Some examples of debt financing include: Traditional bank loansPersonal loansLoans from family or friendsGovernment loans, including Small Business Administration (SBA) loansPeer-to-peer loansHome equity loansLines of creditCredit cardsEquipment loansReal estate loans...

Example of Debt-Service Coverage Ratio Consider a company XYZ Ltd with a debt-service coverage ratio of 4. This means that XYZ limited can cover its debt payments (principal, interest, lease payments etc.) four times over with the current level of operating income. Why Is Debt Service Coverage Ratio Important? The DSCR plays a crucial role lending decisions especially for commercial property loans and loans to small businesses. A business with a higher DSCR may be considered a more prudent borrower whereas a company with a lower DSCR may be considered a higher risk of default....

Employees who receive equity-based compensation can later take their shares of ownership and sell them on the private or public markets. A local tech startup might be trying to attract top talent by offering a favorable salary as well as stock options in the company. This benefits the employee if the shares rise because he or she profits if appreciation happens and it benefits the employer because it can offer non-cash incentives to attract top talent and lower the company’s immediate payroll obligations....

Definition and Examples of Event of Default When you borrow money, such as a personal loan or car loan, you take on certain obligations. These are outlined in your loan or credit agreement. Credit agreements specify which breaches of those obligations will constitute an event of default. For example, let’s say you took out a mortgage to buy a new home. The credit agreement you received from your lender outlined the events of default, such as nonpayment of amounts due....

Acronym: FMV How Fair Market Value Works FMV is an estimate of the market value of a property based on what an educated, willing, and unpressured buyer and seller could agree on, each behaving in their own best interest. The concept of fair market value is used widely in business and life. FMV is used to determine how much you can write off for the donations of property you make to charities as goodwill....

urbazon / Getty Images Form 656, the “offer in compromise” (OIC), gives the IRS an overview of your financial situation so it can review your debt and your ability to pay. It will determine whether the offer suits both parties’ best interests, both the agency’s and your own. Example of Form 656 It’s been a long, tough year economically. You have a side gig in addition to your regular employment, and you earned a fair bit of money from that endeavor early in the year....

A 401(k) plan is a retirement savings plan available from many for-profit companies. A 403(b) plan is a retirement savings plan for religious leaders and many public school employees, as well as those who work for nonprofit organizations. A 457(b) plan is for local and state government employees, as well as highly compensated employees at tax-exempt organizations such as charities, non-profit hospitals, and unions. Annuity Payments There are four main categories of annuities from which you might receive payments: You should leave line 5a blank if your pension and annuity payments were fully taxable....

How Net Operating Loss Works A net operating loss (NOL) is a situation in which the annual tax deductions of a business or other entity are worth more than the owner’s adjusted gross income (AGI). The owner may be able to use this loss to offset other income on their personal tax return, reducing the owner’s total tax bill. Instead of taking all of the NOL deduction on the year of the loss, a business may carry some of those deductions forward to years when it has a profit, effectively decreasing its tax bill in those years....

Before explaining more about OTCQB, let’s review what OTC securities are. OTC stocks are those that are not listed on a major U.S. exchange such as the New York Stock Exchange (NYSE) or the Nasdaq. Many of these companies are smaller and do not meet the requirements to be listed on a major stock exchange. OTCQB is recognized by the Securities and Exchange Commission (SEC) as an established public market....