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What’s a Qualified Personal Residence Trust?
By JLP | January 21, 2006
First off, I’m NOT RECOMMENDING the use of this trust. I’m just sharing some information with you. If this sounds like something you would be interested in, be sure and get expert legal advice.
Okay, I’m WAY out of my league here but I wanted to share this with you. I read a very interesting article titled With a Little Estate Planning, Your House Can Stay in the Family by Damon Darlin this morning in the New York Times. The article talks about Qualified Personal Residence Trusts (”QPRT” – prounounced “Q-Pert”).
Briefly, (from the IRS website) a QPRT involves
“…the transfer of a personal residence to a trust with the grantor retaining a qualified term interest. If the grantor dies before the end of the qualified term interest, the value of the residence is included in the grantor’s estate. If the grantor survives to the end of the qualified term interest, the residence passes to beneficiaries of the trust.”
Here’s how it works:
“The basic plan requires you to deed your house to a type of trust known as a Qualified Personal Residence Trust (”QPRT”), reserving the right to live in the house for a specified number of years. If you live to the end of the specified period, the house (including all post-gift appreciation) passes to your children or other named beneficiaries free of any additional federal or state estate or gift taxes. If you die before the end of the period, the house will be includible in your estate for estate tax purposes. But in most cases you are no worse off than you would have been had you done nothing.“
– Source: Frascona, Joiner, Goodman and Greenstein, P.C.
The Times article also links to some excellent resources about QPRTs:
Qualified Personal Residence Trusts – a very nice post in a Q & A format.
Qualified Personal Residence Trusts Offer Large Potential
Abusive Trust Tax Evasion Schemes – Special Types of Trusts – I’m assuming by the title that the IRS isn’t too fond of QPRTs. What I don’t understand is if QPRTs aren’t illegal, then why must they place them in the “abusive scheme” category? I guess anything that limits your taxes is considered by the IRS to be a scheme. Of course this is an excellent scare tactic to keep people from setting up a trust.
Topics: Tax Planning | No Comments »