For purposes of a federal gift tax and estate tax, a Qualified Personal Resident Trust, or QPRT is an irrevocable trust that removes the value of a primary residence or a second home from an individual’s taxable estate. To be clear, once an agreement has been signed for an irrevocable trust, it cannot be changed. In essence, it is forever. As a result, it is essential to gain an understanding of a QPRT, and what it means before creating it and transferring ownership.
As mentioned, the QPRT is a special trust that can be used to remove the value of one’s property from the taxable portion of their estate. Clearly, this is one of the greatest benefits of the trust. The Balance provides the following example—if a home is worth $500,000, then depending on the age of the homeowner, interest rates, and the retained income period chosen for the QPRT, the homeowner could use as little as $100,000 of a lifetime gift tax exemption to remove the home from his or her estate. Considering that the value of the home will continue to increase, this is a big win.
What’s more, the establishment of a QPRT allows for the property to continue to be lived in, rent-free, while taking advantage of the all of the tax deductions that apply for the retained income period. At the same time, the trust provides protection against decreases in a lifetime gift tax exemption and the estate tax exemption.
Creating a Qualified Personal Residence Trust is especially important when a home or property holds sentimental value. As such, the QPRT ensures that remaining family members can hold onto the property in the event that their loved one dies.
For Attorney Robert Turner, a QPRT represents one of several strategies used to minimize tax consequences for property owners and their family members. Along with the seasoned professionals at Turner Law, Mr. Turner is well versed in estate tax laws, and is pleased to help evaluate all possible options regarding your assets.
To schedule an appointment, call Turner Law today.
Posted on behalf of Turner Law, LLC