Hyden, Miron & Foster, PLLC Law Blog

Thursday, March 28, 2019

5 Reasons to Consider a Qualified Personal Residence Trust

An Arkansas estate-planning attorney may recommend using a variety of estate planning tools to accomplish your goals. One of those tools may be a Qualified Personal Residence Trust (QPRT). A QPRT is an irrevocable living trust used to hold title to your home during your lifetime. The trust allows you to continue to use your home while providing asset protection and tax benefits for you and your heirs. At the end of the QPRT term, the home is transferred to the beneficiaries without incurring estate tax.

Below are five reasons why you might want to consider using a QPRT as part of your estate plan.

  1.  Allows the homeowner to live rent-free during the retained income period.
    A QPRT allows you to live in your home and take advantage of all applicable income tax deductions related to the home during the retained income period of the QPRT without paying rent.
  2. At the end of the retained income period, paying rent can be a benefit.
    You are required to pay rent at the fair market rate at the end of the retained income period of the QPRT for continued use of the home. However, paying rent to your heirs can be seen as a benefit. You can give your heirs more money without using any of your lifetime gift tax exemption or annual exclusion for gifts. You are also reducing your taxable estate by paying down your liquid assets.
  3. Freezes the value of your home at the present market value when the QPRT is created.
    You can realize significant tax savings by utilizing a QPRT to hold title to your residence. The value of the property is “frozen” as of the date the property is transferred to the trust. This feature of a QPRT could save an individual hundreds of thousands of dollars because the value of the home and any appreciation is locked-in as of the date of the trust. Therefore, if the estate tax exemption decreases dramatically in the future or your home appreciates significantly, you do not need to worry because you have locked in the value of your home for estate tax and gift tax purposes.
  4. Remove a significant asset from your taxable estate.
    Using a QPRT could save thousands of dollars in estate taxes depending on the homeowner’s financial situation. Transferring the home to a QPRT reduces the taxable estate for an individual, thereby avoiding or decreasing estate taxes.
  5. You can use a Qualified Personal Residence Trust for your vacation home.
    In addition to using a QPRT to hold title to your residence, you may also use a QPRT to hold title to a vacation home. This benefit allows an individual to create a legacy for loved ones by investing in a treasured family vacation home that future generations can enjoy.

Contact an Arkansas Estate-Planning Attorney for More Information

Choosing a QPRT as part of your estate plan is a complex decision. Even though the trust has benefits, there are also several elements that could make using a QPRT not as beneficial as using another type of estate planning tool to decrease estate taxes and protect property. Contact the Arkansas estate-planning lawyers at Hyden, Miron & Foster, PLLC today. An Arkansas estate-planning attorney can review your entire financial situation to determine if a QPRT would provide the benefits you desire.

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