Qualified Personal Residence Trust
- How does it work?
- What are the key benefits of a QPRT??
- If I have a second home, can I use the QPRT for both homes?
- Is a gift tax return required when a gift is made to a QPRT?
- Are there any other tax benefits offered by a QPRT?
- What If I Die During the QPRT's Term?
- Does my age and the QPRT term affect the tax consequences of the QPRT?
- What if I outlive the QPRT's term and want to continue living in the residence?
- Can the residence be sold while it is in the QPRT?
- Will my children receive the residence with step up in basis at the End of the QPRT Term?
- Do any income tax returns have to be filed in connection with a QPRT?
Qualified Personal Residence Trusts: Overview
In 1990, the U.S. Congress passed legislation that opened an unusually generous opportunity for people who want strong asset protection for their homes and also wish to minimize the impact of estate taxes on children or other heirs by making a pre-death gift of their residences. Called the Qualified Personal Residence Trust (QPRT), this estate-planning tool is an excellent means for individuals with large estates to transfer assets at the lowest possible values.
With this strategy you essentially can have your cake and eat it too. You are able to ‘give’ away your home in order to reap significant tax benefits. At the same time you get to continue to live in the property and you or you and your spouse can be the trustees of the trust. As such, you have full power to buy, sell, or refinance the property. The interest deduction is reported directly on your tax return, and all of the other advantages of home ownership are preserved.