Inchoate Interest

DEFINITION of 'Inchoate Interest'

Interests, generally property interests, that are likely to vest but have not yet actually done so. The inchoate interest usually is dependent on an event occurring that triggers the interest, such as a relative's death triggering an inheritance. The interest that the inheriting relative has in the inheritance is inchoate until the death occurs, at which point it becomes a real interest.

BREAKING DOWN 'Inchoate Interest'

Note that inchoate interests are not certain to vest. There is still the possibility of a change in circumstances that would prevent the interests from vesting or occurring.

RELATED TERMS
  1. Inchoate

    A state of activity or entitlement that is characterized by partial ...
  2. Inheritance Tax

    In some states in the U.S. (and in the United Kingdom), a tax ...
  3. Graded Vesting

    The process by which employees gain a certain percentage of irrevocable ...
  4. Cliff Vesting

    The process by which employees earn the right to receive full ...
  5. Vested Interest

    1. The lawful right of an individual or entity to gain access ...
  6. Inheritance

    All or part of a person's estate/assets that is given to an heir ...
Related Articles
  1. Retirement

    Bursting Boomers' Inheritance Dreams

    Waiting for a big payload from an aging relative? The chance of cashing in is lower than you think.
  2. Investing

    What Does Vesting Mean?

    Vesting is the process of accruing non-forfeitable rights.
  3. Managing Wealth

    ‘I Just Inherited Money’ Now What?

    If you’re lucky enough to inherit money when you're young, here's how to hold on to it.
  4. Financial Advisor

    An in Depth Look at How Inheritances Are Taxed

    The tax implications of an inheritance can be complex. Here's what beneficiaries need to know.
  5. Financial Advisor

    How Advisors Can Protect Inherited IRAs

    A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?
  6. Financial Advisor

    How Advisors Can Assist Clients with Inheritances

    Leaving an inheritance can be complicated and even a burden on the recipient. Here's how advisors can help.
  7. Retirement

    Inherited IRA and 401(k) Rules: Don't Run Afoul

    What you need to know when it comes to the complex rules for inherited IRAs and 401(k)s.
  8. Retirement

    How do you calculate penalties on a 401(k) early withdrawal?

    Find out how to calculate the penalties on early withdrawals from your 401(k), including the impact of the additional 10% tax penalty, vesting and income tax.
  9. Investing

    How Restricted Stocks and RSUs Are Taxed

    Many firms pay a portion of their employees’ compensation in the form of restricted stock or restricted stock units.
  10. Trading

    How Restricted Stock and RSUs Are Taxed

    This form of executive compensation limits how these stocks can be sold. Find out more here.
RELATED FAQS
  1. How is cost basis calculated on an inherited asset?

    Understand how the cost basis for stocks, property and other inherited assets is calculated, and the resulting tax implications ... Read Answer >>
  2. How do I determine capital gain or loss for stocks held in excess of 20 years?

  3. Can I utilize the 1035 exchange provision for an annuity I inherited?

  4. Is a job with a 20% vested after 3 years a good thing?

    I used to make $60,000 a year at my old job, but I changed careers and now make $42,000 a year with 20... Read Answer >>
  5. What is cliff vesting?

    An employee is considered "vested" in an employer benefit plan, once they have earned the right to receive benefits from ... Read Answer >>
  6. I received a small inheritance last year, will it affect next year's social security?

    I received social security - $13,000. That is all my income. Nothing else. I received $22,000 in inheritance, lump sum, last ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center