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 ?
Because the transfer of the personal residence to the QPRT constitutes a gift, the grantor will want the value of the gift to be as low as possible.
Despite the requirement that the QPRT must hold a residence, QPRT status will not necessarily be terminated if the residence is sold during the QPRT term.
Both a PRT and QPRT allow the grantor to deplete the estate coffers and continue living in the residence for the period of the term.
This makes CRTs and QPRTs slightly less desirable while CLTs, private annuities and self cancelling Installment notes SCINs are slightly more desirable.
However, you must pay a fair market rent to the new owners--the QPRT beneficiaries.
Although the value of the property can be excluded from the gross estate if the grantor survives the trust term, the client may owe a gift tax on the present value of the remainder in the QPRT or GRAT.
For example, a $3 million residence put into a 15-year QPRT by somebody 55 years old would be valued at about $840,000 for tax purposes, while the same home placed in a 20-year QPRT would be valued at only about $498,000.
HSW's QPRT enabled Helen to sell her mother's home of 28 years (telling the family that Sara was broke), to force Sara into a small apartment, and to pocket almost half a million dollars of the proceeds.
Upon funding the QPRT, the donor has made an irrevocable gift to the beneficiaries, but the value of the residence is discounted for gift tax purposes based on the actuarial value of the donor's retained interest.
17) With a QPRT, the client retains the exclusive right to live in the residence for a specified term of years.
If structured properly, the QPRT will freeze the value of the taxpayer's residence at the time he or she creates the trust and result in significant estate tax savings.
Even with respect to rather traditional estate tax planning strategies there may be ancillary significant federal tax issues where the law is sufficiently unclear as to bring the advice within their reach, such as when a QPRT or other entity is funded with a fractional interest arguably subject to a discount for lack of marketability.