What are Qualified Personal Residence Trusts (QPRTs)?
For high asset and high income individuals, estate planning can be especially challenging. There are a lot of issues that need to be addressed—from wealth preservation to estate tax issues. A Qualified Personal Residence Trust (QPRT) is a type of trust that can help to remove your primary home from your estate. It offers a number of different potential benefits. Here, our New Jersey estate planning attorney provides a more detailed explanation of QPRTS.
What is a QPRT?
As explained by Investopedia, a Qualified Personal Residence Trust or QPRT is a specialized type of irrevocable trust that allows a person to remove their primary home from their estate. It allows a homeowner to transfer their residence to a trust while retaining the right to live in the home for a specified number of years. By using a QPRT, individuals can potentially reduce the size of their taxable estate and the associated estate taxes when the property eventually passes to their heirs.
The Benefits of Setting Up a Qualified Personal Residence Trust
Why set up a QPRT in New Jersey? It could offer some key benefits that help you achieve your estate planning goals. Some of the potential advantages of setting up a QPRT include:
- Estate Tax Reduction: A QPRT is generally the most useful for those who are likely to have estate tax liability. As noted, it allows the value of the residence to be removed from one’s estate. Instead, the trust—which is irrevocable—will own the property.
- Leverage the Gift Tax: When a residence is transferred to a QPRT, the gift is valued as of the transfer date but accounts for the grantor’s retained right to live in the home for a predetermined period. The retained interest lowers the present value of the gift to the beneficiaries—which often results in lower gift taxes.
- Retained Use: The grantor can continue to live in the home for the term specified by the trust. Most often, it will range from 10 to 20 years. The benefit allows the grantor to maintain their lifestyle and residence without any immediate displacement. At the same time, it sets up the eventual transfer of their property to their heirs.
Is a QPRT Right for My Situation?
It depends. Not everyone needs—or can truly benefit from—a QPRT. If you are unlikely to have estate tax liability, a QPRT offers far less benefits. Other estate planning options—including other types of trusts—may work more effectively for your situation. A top-tier New Jersey estate planning lawyer can help you evaluate the advantages and disadvantages of a QPRT.
Get Help From Our New Jersey Estate Planning Lawyer Today
At Poulos LoPiccolo PC, our New Jersey estate planning attorneys have the skills and experience needed to take on the full range of trust planning matters. If you have any questions or concerns about QPRTs, we are here to help. Contact us today to set up your fully confidential initial consultation. Our firm provides estate planning support throughout New Jersey.
Source:
investopedia.com/terms/q/qualified-personal-residence-trust.asp
