Qualified Personal Residence Trust

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Qualified Personal Residence Trust

Also called a QPRT. In the United States, a trust to which the grantor transfers his/her personal residence. A QPRT is irrevocable. Therefore, the value of the residence is removed from the grantor's estate, which reduces his/her estate tax liability. The grantor may continue to live in the home for no charge for a certain number of years. The grantor, however, usually must pay a gift tax proportionate to the value of the home he/she owns free and clear.
References in periodicals archive ?
Unlike the QPRT, there is no trust term that the grantor must outlive.
Clients may also create more than one QPRT for different beneficiaries and transfer partial tenant-in-common interests in the property to each trust.
The decision to create a QPRT requires balancing the potential estate tax savings, based in part on current interest rates, against the consequences of relinquishing ownership to the next generation.
By contrast, real estate that passes to your heirs outside a QPRT enjoys a step-up in basis; that is, any gain on its subsequent sale is based on its fair market value at the time of your death, not on what you paid for it.
The 98-year lease technique in conjunction with an expiring QPRT generally works as follows: The client enters into a 98-year lease prior to the expiration of the QPRT term and records that lease.
The longer the GRAT or QPRT term, the smaller the value of the gift to the GRAT or QPRT beneficiaries for gift tax purposes.
2702(a)(3)(A)(ii), a QPRT allows a grantor to transfer a persona] residence to heirs at a reduced transfer tax cost, while continuing to use the property for a specified term.
2702-5(b) and (c) provide for two types of personal residence trusts; the QPRT is the more flexible and commonly used.
Currently, regular personal residence trusts and QPRTs may be established, allowing the contributor of the residence to continue living in it without requiring the trust to pay him an annuity or unitrust amount.
There are many advantages to using a QPRT to transfer a primary residence, including:
If a QPRT instrument fails to include the required prohibition, the retained interest will be assigned a value of zero under Sec.
B contributes the personal residence to a QPRT when the Sec.