Qualified Personal Residence Trusts

Preserving a Home with a Qualified Personal Residence Trust

A qualified personal residence trust (QPRT) can be an effective way to keep a primary residence in the family. This type of trust, an irrevocable living trust, can also be used to protect vacation property. In the case of both types of homes, the trust allows the grantor to use the property for the term of the trust and then pass the property to beneficiaries. At the Boston law firm of Taylor, Ganson & Perrin, LLP, our lawyers have drafted this type of trust for many clients as part of a comprehensive estate plan. To learn more about this type of trust, contact us.

QPRTs have some requirements that may make this type of trust unsuitable for some people. Principal among them is that the trust must end before the death of the grantor. If it does not, the property in the trust reverts into the decedent's estate, leading to the tax liability the trust was established to avoid. It is a gamble, but one with significant rewards.

A qualified personal residence trust can be an effective way to protect a family home or vacation property from a forced sale.

If the grantor survives the term of the trust, the property passes to the beneficiaries with significant tax advantages. The first is that the residence transfers with a value established at the beginning of the trust, not the appreciated value at the time of the transfer. The value of the gift may be further reduced by deducting the cost of the use of the property while the trust was in force. For example, the grantor could continue to live in the house or visit the vacation home. With a reduced value, the residence is subject to a gift tax based on a previous value minus the cost of the interest that the grantor retained in the property during the term of the trust.

Our attorneys have found that using this type of trust may prevent executors or administrators from being forced to sell the family residence to pay estate taxes. To learn whether this might be a suitable type of trust instrument, contact our Boston law firm.