The Qualified Personal Residence Trust
The qualified personal residence trust is a great estate planning tool used to remove your personal residence from your estate at a lower gift tax valuation. The qualified personal residence trust allows you to stay in your personal home for a number of years, but receive a reduced gift tax valuation at death so that the entire value of the home is not included in your estate for tax purposes.
The qualified personal residence trust is funded with the deed to your personal residence, or enough money to purchase a qualifying personal residence within three months of trust execution. The qualified personal residence trust also states a number of years for which the residence stays in the trust. If you (the grantor) survive the term of years, then the residence goes to designated beneficiaries or another irrevocable trust (depending on how the document is drafted). Only one home is allowed to be held by each qualified personal residence trust, however, each taxpayer may have up to two qualified personal residence trusts. If these parameters are not followed, you run the risk of disqualifying the trust and losing your tax benefits with regard to the reduced valuation.
When the term of years expires, you may continue to live in the residence, but you will have to pay rent to the new owner(s) (the beneficiaries). If you do not survive the term of years, the residence reverts back into your estate, therefore, it is important to choose a reasonable term of years in the drafting of the document.
Learn more about the most common irrevocable trusts:
- Irrevocable Life Insurance Trust
- Qualified Personal Residence Trust
- Special Needs Trust Planning
- Irrevocable Grantor Trusts
Learn more about the different estate planning strategies:
- Incapacity Planning
- Last Will and Testament (Traditional Long Will vs. Pour Over Will)
- Revocable Living Trust Planning
- Irrevocable Trust Planning
Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your business law and corporate transactions, estate planning, probate, guardianship and/or real estate needs.