Use a Qualified Personal Residence Trust to Avoid Federal Estate Tax

A qualified personal residence trust (“QPRT”) is a special type of trust that can be used to avoid or minimize Federal Estate Taxes. The QPRT is used to remove the value of your personal residence from your estate, thereby reducing the size of your estate that is subject to Federal Estate Tax.

With the QPRT, you create an irrevocable trust, and convey ownership of your personal residence to the Trust. However you, also, reserve the right to live in the residence for a specified period of time. When the time expires, the residence is transferred to the beneficiaries you have named in the Trust. Under the right circumstances, using the QPRT can result in significant Federal Estate Tax savings for your estate, while ultimately transferring your residence to your heirs.

When coupled with an appropriate long-term lease arrangement that kicks in when the residence transfers to your heirs, you can, even, keep the right to continue living in the residence even after the QPRT ends.