Trust Personal Residence With Trust
Description
How to fill out Personal Residence Trust?
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FAQ
Most QPRTs do not generate any income and an income tax return is not typically required. If the property generates income, a Grantor Trust Tax Return, Form 1041, may be required.
One of the main disadvantages of a QPRT is the loss of stepped-up basis. When you own real estate and you pass it to a beneficiary through your Will, your beneficiary receives it with an income tax basis equal to the fair market value of the house at the time of death.
All appreciation from the date of your acquisition through the date of your death disappears. This is called a ?stepped-up basis?. When the beneficiary sells the property, he or she only pays capital gain on the appreciation (adjusted for capital improvements) from the date of your death through the date of sale.
The principal residence exclusion under section 121 allows an individual or married couple to exclude up to $250,000 or $500,000 of gain on the sale of a primary residence. But since an irrevocable trust is not a natural person, it is typically not allowed to use this exclusion. However, there are a few exceptions.
The key disadvantages of placing a house in a trust include the following: Extra paperwork: Moving property in a trust requires the house owner to transfer the asset's legal title. This involves preparing and signing an additional deed, and some people may consider this cumbersome.