Qualified Personal Residence Trusts (QPRT)

Qualified Personal Residence Trusts, or QPRTs (pronounced “cue-pert”), are Advanced Estate Planning instruments that help clients transfer their principal residence at a lower Estate/Gift Tax value.

Clients benefit from a QPRT’s by transferring their principal residence into an Irrevocable Trust (meaning that the trust cannot be amended, modified, or revoked once it has been created and funded), and retaining a right to live in that residence for a period of years. The named beneficiaries of the trust will receive the residence from the trust when the term ends, should the Grantor survive until that time.

QPRTs are excellent tools for clients with high-value homes and clear ideas about who they want to own their home once they are gone.

Even though this transfer represents a taxable gift, it is a gift made at the present value of the residence (resulting in tax savings if the residence appreciates beyond the value at the date of transfer), with a hefty discount equal to the value of the retained interest. Factors that influence the value of the retained interest include the age of the transferor (the person giving the residence to the QPRT) and the IRS’s 7520 rate (which is calculated monthly:¬†See¬†http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Section-7520-Interest-Rates for current rates).

QPRTs are excellent tools for clients with high-value homes and clear ideas about who they want to own their home once they are gone. The tax savings realized from the use of a QPRT can be substantial, especially if one thinks about the rate at which real estate appreciates in high-demand areas over a ten- or fifteen-year period.

This is a particularly complex area of Advanced Estate Planning due to the amount of moving parts involved. Attorneys at Bezaire, Ledwitz & Borncamp have experience weighing all of the delicate factors involved in recommending a QPRT to a client, and know how to take advantage of this Advanced Estate Planning solution in a prudent manner.

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