Qualified Personal Residence Trust
A Qualified Personal Residence Trust (QPRT) is essentially an irrevocable trust established by the owner of the residence by transferring the title of the residence or vacation home. The previous owner is the Grantor and will retain the right to control and reside in the residence for the length of the term of the QPRT. At the end of this term, the residence will pass to the beneficiaries (most likely your children).
The major benefit to using this is that the home can be given outright to your children but at a significant decreased value, thus decreasing any estate taxes you may be liable for.
Advantages:
- Creditor Protection
- Removes Home from Your Estate
- You can Continue to live in the home and your children will receive the home upon your death.
- You can put both personal residences and a vacation home in a QPRT
- Provides excellent estate tax savings, by removing any appreciated value of a house from a parent’s estate which can help reduce estate tax liability.
Disadvantages:
- Loss of estate tax savings (the home will not be devalued) if you fail to outlive the term of the Trust.
- Your children will become your landlord when you survive the expiration of the term. Your children could evict you or raise your rent! Hopefully, your kids like you!
- These trusts are very complicated, you need an attorney to set one up.
A QPRT is an irrevocable trust you create. It is funded with your ownership interest in a personal residence. By using a QPRT, you can exclude the full value of the residence from your estate, and the residence will not be subject to estate tax.
