The housing market has seen a drop in prices as the U.S. economy grapples with the unfolding credit crisis. But the housing slump may work to a client’s advantage, if your client desires to pass on the family residence or vacation home to other family members at a considerable transfer tax discount. This may be accomplished by creating a Qualified Personal Residence Trust (QPRT), an estate planning freezing technique.
A QPRT is an irrevocable trust funded with one or a portion of one personal residence property, whereby the grantor retains both a contingent reversionary interest and an income interest in the residence for a term of years. Separate QPRTs may be created to hold a “principal residence” and one “other residence.” As defined in the regulations, “other residence” includes a residence used for personal purposes exceeding the greater of 14 days per year or 10 percent of the number of days that such residence is rented as a personal residence at fair market value. At the end of the term, trust assets may pass outright to the grantor’s family members or continue in further trust for them.
Benefits
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