With rising estate tax and gift tax exemptions, the qualified personal residence trust is less common than it once was, but some people in Nevada still have a QPRT as part of an estate plan. With a QPRT, the owner transfers ownership in the home to a beneficiary but retains the right to continue living in the home for a fixed period of time. A QPRT can remove the value of the home from the estate and reduce the taxes on the home.
However, a QPRT is a complex trust, and it does carry some risks. For example, if the owner dies before the term named in the trust comes to an end, the tax benefits are not available.
Beneficiaries should prepare ahead of time when a QPRT is part of an estate plan. Ideally, there should be an agreement about who will perform such tasks as paying bills, handling insurance, collecting any rent that may be paid on the property, repairing and fixing up the place and more. Furthermore, if there are multiple beneficiaries, there needs to be an agreement about how the property will be owned and managed and who will be in charge of what aspects of that management. Beneficiaries might also consider what they want to do if one of them dies.
It may be possible to work out many of these issues while the owner is still alive. Communication can be an important aspect of trust planning and the overall estate plan. People should talk to family members or an attorney about the plan if they are comfortable doing so. In addition to being able to make plans around a trust like a QPRT, this also gives the family the opportunity to ask questions and understand why certain decisions have been made. This may make it less likely that the plan is challenged or misunderstood.