Using a qualified personal residence trust

On Behalf of | Aug 31, 2016 | Trusts

The 2016 federal estate tax exemption is $5.45 million for single people and $10.9 million for married couples. However, this could change, and Nevada residents might want to consider whether a qualified personal residence trust is a good idea for estate planning purposes. This type of trust could allow a person or couple to transfer real estate and lower the value of their estate.

The grantor no longer owns the home when put into a QPRT as it belongs to the trust instead, and the deed for the property is now in the name the trust. The grantor can specify a time frame when he or she may use the house without paying rent. After this time passes, the beneficiaries receive the property. The grantor must pay rent after this time, and the beneficiaries could lease the house to the grantor. Paying rent to stay at a property offers another way to give heirs money without gift taxes or estate taxes applying.

The maker of the QPRT must survive longer than the trust’s terms. If the grantor dies while the trust is ongoing, then the property returns to the grantor’s estate at the current market value of the property.

When considering a qualified personal residence trust, people must plan carefully since this type of trust is not revocable. This means that a grantor cannot change his or her mind and edit the terms of the trust after it is finalized. A QPRT could offer other benefits like protection against lawsuits, but people might find that a revocable trust is the right choice instead. They might want to consult an attorney when evaluating their options.