Qualified Personal Residence Trust (QPRT)
A QPRT is a type of irrevocable trust. The grantor of the QPRT (“Grantor”) transfers ownership of their principal residence or vacation home to the QPRT and reserves the right to live in the house for a specific term. If the Grantor outlives this term, the property is transferred to the beneficiary of the QPRT and the value of the property and appreciation is removed from the Grantor’s taxable estate.
The Grantor reserves the right to live in the home for the term of the QPRT, which discounts the value of the property for gift tax purposes. When the beneficiary becomes the owner of the property, they may allow the Grantor to continue living in the home, but the Grantor must pay rent or the property may still be included in the value of the Grantor’s estate. The rent payments also serve as a vehicle to lower the value of the Grantor’s taxable estate.
If the Grantor dies before the QPRT term expires, then the property return to the Grantor’s estate as if the QPRT never existed. Consequently, the value of the property will be included in the Grantor’s estate for tax purposes and it will pass through the Grantor’s estate. Therefore, it is important for the Grantor to also have a Will that leaves the property to the Grantor’s desired beneficiary.
If you already have a QPRT and you are waiting out the term, it would be beneficial to have an attorney at our office review your estate plan to determine whether your Will needs to be revised to support the QPRT and whether any other changes need to be made to improve the succession plan.
If you would like to learn more about whether utilizing a QPRT would be beneficial for your estate plan or if you would like one of our attorneys to review your current estate plan, please contact our office to schedule an appointment.
The legal information in this blog entry is not intended to be a substitute for seeking personalized legal advice from an attorney licensed to practice in your jurisdiction. Further, nothing contained in this article is intended to create an attorney-client relationship with any reader. This article and website are made available by Waldron & Schneider for educational purposes only and to give basic information and a general understanding of the law, not to provide specific legal advice. By using this website you understand that there is no attorney client relationship between you and Waldron & Schneider. The article and website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. For more information or questions you can contact us and one of our attorneys will be in touch soon.
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