Qualified Personal Residence Trusts are not used very often anymore, but they are still good to be aware of. This type of trust may be something you want to consider during the estate planning process. It is also a type of trust that you may have to deal with if your parents or grandparents set one up.
What is a Qualified Personal Residence Trust (QPRT)?
A QPRT is an estate planning tool allowing a homeowner to transfer his or her home into a trust and still retain the right to live in said home for a set term of years. One of the main benefits of doing this is that it allows the homeowner to transfer the home to beneficiaries with reduced gift tax liability. Also, provided the homeowner lives long enough, the value of the home is removed from his or her estate
A QPRT is an irrevocable trust. It can hold a primary residence or a secondary residence. In either case, you as the settlor of the trust retain an interest in the house for some time. When that period is over, the remaining interest is transferred to the beneficiaries. It is simply a way to give away your home while you still live in it. The value of the gift to your children will be affected by when they receive it. The longer you keep the right to stay in the home, the smaller the value of the remainder interest which will be transferred to your beneficiaries. Additionally, if you were to die while you still occupied the residence, the home would come back into your estate for tax purposes. This means that if you are thinking of establishing a QPRT, you should not retain the right to occupy the home for longer than your life expectancy.
As previously stated, the primary benefits of a QPRT relate to tax liability. You get tax benefits while still being able to retain your home. You can live in the residence rent-free and take all available income tax deductions. It also removes the residence and all future appreciation in value of the residence from your taxable estate. Additionally, a QPRT is a way to keep your home in the family. The QPRT allows you to give your heirs your residence in a way that encourages keeping it in the family for the long term.
Trusts and Estates Legal Help
There is a wide range of trust types out there. Each serves a unique purpose and can be essential to designing an estate plan that best meets the need of an individual’s unique circumstances. For estate planning with your unique needs in mind, the Law Offices of Rodney Gould is here for you. We take what is important to you and design an estate plan that protects it. Contact us today.
Posted in: Estate Planning