What Is a Qualified Personal Residence Trust (QPRT)? A qualified personal residence trust (QPRT) is a specific type of irrevocable trust that allows its creator to remove a personal home from their estate for the purpose of reducing the amount of gift tax that is incurred when transferring assets to a beneficiary.

Who is the beneficiary of a QPRT?

Step 1. Transfer of property to a QPRT. The grantor creates a QPRT for a term of years and designates beneficiaries, usually family members. The grantor contributes the residence to the trust, thus removing it from his or her own name and creating a taxable gift.

How short can a QPRT be?

The short term rate is for loans three years or less. The midterm rate is for loans longer that three years and shorter than nine years. The long term rate is for loans greater than nine years.

What happens when a QPRT expires?

If the grantor lives in the QPRT home after the trust term expires, they have to pay rent. Otherwise, the house is reverted into their taxable estate. This can cause legal or taxation issues.

Can a QPRT be amended?

interested in a QPRT some ability to amend a QPRT when all such parties agree. the donor dies before the end of the initial QPRT term, the trust terminates and the interest in the residence held in the QPRT reverts to the donor’s estate. there is a separate column for gifts that are included in the estate (column C).

Can you unwind a QPRT?

If you unwind the QPRT, you will have wasted any payment of federal gift tax or gift tax exemption that you may have used on the original transaction. You will have squandered that amount because you won’t get that back when you unwind the QPRT.

Who are the beneficiaries of a QPRT Trust?

The grantor creates a QPRT for a term of years and designates beneficiaries, usually family members. The grantor contributes the residence to the trust, thus removing it from his or her own name and creating a taxable gift. The fair market value of the residence is discounted for gift tax purposes.

What happens after the term of a QPRT?

The Grantor or Grantors can continue to use and enjoy the possession of the property during the term of the trust. If the Grantors live beyond the term of the Trust, the beneficiaries can “rent” the property back to the Grantors for fair market rent and this will keep the property from reverting back to the Grantor’s estate for estate tax purposes.

Can a QPRT help reduce the size of an estate?

Transferring a residence to a qualified personal residence trust (QPRT) is a popular estate planning technique that can help reduce the size of the grantor’s estate.

How does a QPRT work for income tax purposes?

A QPRT is a grantor trust for income tax purposes. As a result, during the trust term the grantor can claim an income tax deduction for any real estate taxes he or she pays. The grantor has a predetermined limit on the right to occupy the residence placed in trust and must relinquish ownership at the expiration of the QPRT term.