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Simple English definitions for legal terms
Crown loan
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A quick definition of Crown loan:
A Crown loan is a type of loan where someone borrows money from a family member without having to pay interest. The borrowed money is invested, and any income earned from the investment is taxed at the borrower's rate. This type of loan is named after Harry Crown, who was one of the first people to use it. It is usually used by parents to help their children invest and save money.A more thorough explanation:
Definition: A type of interest-free demand loan, usually from a parent to a child, in which the borrowed funds are invested and the income from the investment is taxed at the child's rate.
Example: Harry Crown of Chicago was one of the first persons to use this type of loan, hence the name "Crown Loan." For instance, a parent may lend their child $10,000 interest-free, and the child invests the money in stocks or bonds. If the investment earns $500 in interest, the child will be taxed on that income at their own tax rate, which is usually lower than the parent's tax rate.
Explanation: Crown loans are a way for parents to transfer wealth to their children while minimizing taxes. The loan is interest-free, so the child does not have to pay any interest to the parent. Instead, the child invests the money and earns income from the investment, which is taxed at their own tax rate. This type of loan is often used for educational expenses or to help children buy a home or start a business.