A good way to reduce estate taxes and get some additional asset protection on your home is through the use of something known as a qualified personal residence trust (QPRT). It is a form of “split-interest” estate planning. A QPRT divides a personal residence into a current use period and a remainder use period. The owner transfers the residence to a properly drafted irrevocable trust. The owner retains the right to use the property as a personal residence for a set term of years. At the end of this period, the owner’s right to use the residence might terminate, unless otherwise provided, and the residence goes to the beneficiaries of the trust.
A QPRT uses the values of the current use period and remainder use period to minimize estate taxes (which are based upon certain interest rate assumptions provided by the IRS). Using a QPRT helps ensure that the residence and any appreciation on the value of that residence is excluded from the estate. Given the present value of the future gift and the fractional interest of the ownership, the QPRT can significantly reduce estate taxes. It also provides excellent protection of the residence from creditors.
A QPRT is an advanced form of estate planning, so it can be complex. If you would like to provide additional protection on your home, while minimizing taxes, a QPRT may be right for you. To find out more or to schedule a free consultation, contact our office today at 888.222.1328.
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