What is a Qualified Personal Residence Trust? A Qualified Personal Residence Trust (“QPRT”) is a Trust that enables you to remove a residence from your estate upon death at a reduced estate tax cost, while retaining the use, enjoyment and benefits of the property for a period of time up to and including your death. For a property that is expected to significantly increase in value between the time of creation of the Trust and your death, the benefits to your estate and beneficiaries can be substantial.

To establish a QPRT, you will need to transfer your interest in your primary home or any other home you own, including a vacation home, to a QPRT. You will retain the right to use and occupy the property for a specified number of years (the “use period”) and after that period can also have the right to rent or lease the property until death. At the termination of the use period assuming you survive, the property passes to the remainder beneficiaries who are oftentimes your children or more remote descendants.

If one or more individuals own a residence jointly, each individual may create his
or her own QPRT by contributing that individual’s interest to a separate QPRT. It should be noted, the tax benefits of the QPRT are achieved only if you survive the use period. If you fail to survive the use period, your estate will lose all of the potential estate tax savings as in that event the entire value of the property will be included in your estate for estate tax purposes.

Essentially what the QPRT does is divide your interest in the property between your assumed life estate and the remainder interest that goes to your beneficiaries. These two interests are valued based on certain actuarial tables that are beyond this discussion, but the end result is that the value of the property transferred to your beneficiaries is reduced by the value of your life estate thereby reducing any related gift or estate taxes by a corresponding amount.

Drafting a Qualified Personal Residence Trust is a part of a sophisticated estate plan, and although not just for the wealthy, you will want the assistance of a qualified and experienced attorney with specialized knowledge in this area to prepare a QPRT that meets your unique estate planning goals. With over 20 years of experience and an advanced legal education in Elder Law and Estate Planning, that is exactly what we can do for you. Please contact us today to schedule your free consultation.