Three-Year Rule

Definition of 'Three-Year Rule'


Section 2035 of the tax code, which stipulates that assets that have been gifted through an ownership transfer, or assets for which the original owner has relinquished power, are to be included in the gross value of the original owner's estate if the transfer took place within three years of his or her death. If gifted assets do not meet the necessary requirements, the value of the assets is added to the value of the estate at the time of the original owner's death, increasing its value and the estate taxes imposed on it.

Investopedia explains 'Three-Year Rule'


This rule prevents individuals from gifting assets to their descendants or other parties once death is imminent in an attempt to avoid estate taxes. The rule does not include all assets gifted or transferred in that three-year period and is mainly focused on insurance policies or assets in which the deceased retains an interest.



comments powered by Disqus
Hot Definitions
  1. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  2. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  3. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  4. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  5. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  6. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
Trading Center