A SCIN is an installment debt obligation that by its terms is extinguished at the death of the seller. It is similar to a private annuity in that an asset is sold on an installment basis. However, with a SCIN, the installments are usually shorter than the seller's life expectancy. The buyer (child) usually pays a "risk premium" in the form of an above-market interest rate to the seller (parent) as a consideration for the cancellation provision. Generally, nothing will be included in the seller's gross estate, but any deferred gain on the installment obligation will be reported for income tax purposes.
In addition, management may not be able to react quickly in situations that require shareholder or board approval. Finally, the initial cost of registration and continuing compliance can be high - including reporting requirements, board of director and shareholder meetings, proxy solicitations and investor and financial community relations.