A qualified personal residence trust, or QPRT, can provide estate and gift tax savings, but they also can be complicated to set up and maintain. Learn more about how a QPRT works, and whether it fits your estate plan.
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updated November 21, 2023 · 3min read
If you own a home or two, you may want to learn more about a qualified personal residence trust, also called a QPRT (pronounced "Q-pert"), which can remove the value of your primary or secondary residence from your estate and potentially help you save money on federal estate and gift taxes.
An irrevocable qualified personal residence trust requires that you transfer the ownership of your home into the trust. Because you are not the owner of the house at the time of your death, the value of the property is not included in your estate, effectively removing it from being subject to estate tax.
With a QPRT, you retain the right to live in the property for the term of the trust without paying rent. At the end of the term, your named beneficiary takes ownership of the property. If you die before the term of the trust expires, the value of the house would be included in your estate for estate tax purposes.
To avoid this possibility and achieve estate tax savings in a different way, another option is a non-qualified personal residence trust (NQPRT), which also holds a home but does not exclude its value from estate taxes. An NQPRT operates quite differently in that it involves a property transfer to the trust in exchange for a self-canceling installment (SCIN), and the grantor does not continue to live in the home rent-free.
Whether to include a QPRT in your estate plan depends upon your individual financial situation.
You may want to consider the pros of a QPRT, which include:
There are some cons, however, to establishing a QPRT:
Overall, it is important to remember that if it's not created and maintained properly, you would lose any qualified personal residence trust protection you sought to have.
Indeed, setting up and maintaining a QPRT can be incredibly complex, so you should seek professional advice, such as that of an online service provider, to make sure your estate plan is as comprehensive as possible.
by Michelle Kaminsky, Esq.
Freelance writer and editor Michelle Kaminsky, Esq. has been working with LegalZoom since 2004. She earned a Jur...
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