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Simple English definitions for legal terms
rollover
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A quick definition of rollover:
Rollover refers to two different financial actions. Firstly, it is the renewal or extension of a short-term loan or note. Secondly, it is the transfer of funds from one investment to another of the same type, often done to delay paying taxes.
A more thorough explanation:
Definition: Rollover refers to two different financial actions:
- The extension or renewal of a short-term loan or note.
- The transfer of funds, such as IRA funds, to a new investment of the same type, especially to defer payment of taxes.
For example, if a borrower has a short-term loan that is due to be paid back soon, they may choose to rollover the loan by extending the loan term and refinancing the loan. This allows the borrower to continue using the funds without having to pay back the loan in full.
Another example of rollover is when an individual transfers their IRA funds to a new IRA account of the same type. This allows the individual to defer paying taxes on the funds until they withdraw them from the new account.
These examples illustrate how rollover can be used to extend or renew a loan or to defer taxes on investments.