Installment notes are transfer techniques that provide for payment of the purchase price over a period of years. What triggers a self-canceling installment note?

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Self-canceling installment notes are triggered by the death of the person holding the note. A premium is charged for this right to cancel the note by any other means than death. The seller does not include the unpaid amount in the estate. The seller does include the present value of the unpaid amounts as part of income with respect of a decedent. The initial value of an SCIN is less than an installment not, so the buyer has to give additional consideration in the form of a higher principal amount or higher interest rate. Planners may recommend a SCIN when estate tax rates exceed marginal income tax rates.

Installment Notes Are Transfer Techniques That Provide for Payment of the Purchase