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Understanding qualified personal residence trusts

There are many different types of trusts available, and each one has a slightly different purpose and use. Therefore, as a person that is considering creating a trust, it is a wise idea to read about the different types of trusts in order to decide which one works for you.

A qualified personal residence trust (QPRT) is a particular version of an irrevocable trust. This means that you indefinitely place some assets in this trust with the intent of passing it on as a form of inheritance after your lifetime. Putting these assets in a trust in this way will mean that the value of the assets will be removed from your taxable estate, and you will be able to reduce the amount that is paid in estate taxes.

What does a QPRT involve?

Creating a QPRT means that you put one of your properties, perhaps your primary home or your holiday home, in a trust. You effectively transfer the ownership of this property, and this is a very difficult process to reverse. It is, therefore, important that you evaluate whether creating a QPRT is right for you.

How do I know if creating a QPRT is the best choice for me?

Creating a QPRT is likely a good idea for you if you have a large estate and you are wanting to reduce estate taxes after your death. In this regard, it is important to consider the fact that your estate value is likely to increase significantly over time.

If you are interested in creating a QPRT, it is important that you consider all options before making a final decision.

Source: The Balance, "The Pros and Cons of Qualified Personal Residence Trusts," accessed April 01, 2018

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