What are QPRTs?

A “QPRT” (often pronounced “cue-pert”) is one of many acronyms often used within the context of estate planning to describe a particular tax-planning tool. Quite simply, QPRT stands for “Qualified Personal Residence Trust,” and is a planning tool utilized for the lifetime gifting of a personal residence for gift tax planning purposes.

As with GRATs (“Grantor Retained Annuity Trusts”) and GRUTs (“Grantor Retained Unitrusts”), the premise of a QPRT involves a lifetime gift made to a trust (usually for the ultimate benefit of family members), with the grantor (that is, the creator of the trust) retaining a benefit for a term of years. Using the actuarial tables in the Treasury Regulations, a value is placed on the grantor’s retained value (in this case, the grantor’s retained use of the personal residence), which is then deducted from the value of the gift. If grantor dies within the term of years, the residence must be included in his or her gross estate. However, if the grantor survives the term of years, the residence will have been transferred to the trust beneficiaries with often greatly reduced gift tax consequences.

While the mechanics may seem complex, in a general sense, this means that QPRTS allow for the transfer of appreciating personal residences to future generations with significantly less wealth transfer taxes being incurred than had the home been gifted outright.

However, as you may imagine, there are a few drawbacks to QPRTs, and thus they may not be ideal in every gift-planning situation. It is important to thoroughly discuss the pros and cons of QPRTs, as well as your other available gifting options, with the qualified estate planning attorneys at Garg & Associates prior to implementation.

For more information on Qualified Personal Residence Trusts and/or other gift tax planning vehicles and strategies, we invite you to call the Houston Estate Planning attorneys at Garg & Associates today.

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Garg & Associates, PC | 21 Waterway Avenue, Suite 300 | The Woodlands, Texas 77380 Please call 281-362-2865 | Fax: 866-743-4506
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