Qualified Personal Residence Trust
What this document covers
A Qualified Personal Residence Trust (QPRT) is a legal vehicle that allows you to transfer ownership of your personal residence into a trust while retaining the right to live in the home for a specified period. This arrangement benefits estate planning by reducing the taxable value of your estate and allows you to transfer property to beneficiaries, typically your children, at a reduced gift tax cost. Unlike conventional trusts, a QPRT allows you to preserve the use of your home while also planning for its future ownership.
Key components of this form
- Donor and Trustee Information: Details about the individuals involved in the trust.
- Property Description: Specification of the residence being transferred into the trust.
- Initial Term of Use: Conditions under which the donor can occupy the residence during the trust term.
- Disqualification Events: Circumstances that may cause the trust to be invalidated for tax purposes.
- Distribution Provisions: Instructions on how the trust assets are to be disbursed to beneficiaries upon termination of the trust.
Common use cases
This form is beneficial when you wish to remove your personal residence from your taxable estate while still retaining the right to live in it for a specified number of years. It is particularly useful for those looking to pass down property to heirs while minimizing potential gift and estate taxes. Scenarios include planning for significant wealth transfer, estate tax mitigation, or when you want to secure your property for future generations.
Intended users of this form
- Homeowners seeking to transfer their residence to their children or other beneficiaries.
- Individuals looking to reduce their estate tax liabilities.
- Anyone involved in estate planning who wishes to maintain a personal residence while also establishing a clear plan for future ownership.
- Individuals who anticipate significant appreciation in the value of their property.
Instructions for completing this form
- Identify the parties involved, including the donor and trustees.
- Specify the residence being placed into the trust, along with a clear description.
- Determine and fill in the initial term during which you can continue to live in the residence.
- Include provisions for any disqualifying events that may affect the trust's validity.
- Sign the agreement in the presence of a notary if required by state law.
Does this document require notarization?
Notarization is required for this form to take effect. Our online notarization service, powered by Notarize, lets you verify and sign documents remotely through an encrypted video session, available 24/7.
Typical mistakes to avoid
- Failing to thoroughly describe the property being transferred into the trust.
- Not specifying the duration of the initial term correctly.
- Overlooking disqualifying events that could invalidate the trust.
- Not consulting a tax advisor or attorney about the implications of the QPRT.
Why complete this form online
- Immediate access to a downloadable QPRT form tailored for your needs.
- Easy editing options to customize the form to fit your circumstances.
- Secure storage of your personal information and completed documents.
- Guidance provided throughout the process to ensure proper completion.
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FAQ
A Qualified Personal Residence Trust (QPRT) is a specific type of irrevocable trust that allows its creator to remove a personal home from his or her estate for the purpose of reducing the amount of gift tax that is incurred when transferring assets to a beneficiary.This tax can also be lowered with a unified credit.
Each taxpayer may have up to two QPRTs. Each QPRT may hold an interest in only one home. Therefore, if you wish to transfer your principal residence and a vacation home to a QPRT, you must create two separate trusts.
A qualified personal residence trust (QPRT) is a trust to which a person (called the settlor, donor, or grantor) transfers his personal residence. The grantor reserves the right to live in the house for a period of years; this retained interest reduces the current value of the gift for gift tax purposes.
Why Create a QPRTYou can put in the Trust your primary residence or your vacation home. When you do that, you can quickly reduce your estate's size below the taxable threshold so that you don't pay any estate taxes when you pass the home to your heirs.Any appreciation in value in the house is not taxable.
Specifically, a QPRT is an irrevocable grantor trust, which allows an individual to take advantage of the gift tax exemption by putting a personal residence, either primary or secondary, into a trust.Ultimately, a QPRT reduces estate tax to the grantor and benefits the grantor's heirs/beneficiaries.
Because there's no limit on how long the QPRT must run, it's not uncommon to see QPRTs that were created 10 to 15 years ago finally expire today.
The QPRT transaction will be completely undone if you die before the retained income period ends. The value of the residence will be included in your taxable estate at its full fair market value as of the date of your death. Some other potential drawbacks should be considered as well.
Specifically, a QPRT is an irrevocable grantor trust, which allows an individual to take advantage of the gift tax exemption by putting a personal residence, either primary or secondary, into a trust. The grantor determines how long he will retain possession and use of the residence.
