Palm Springs Qualified Personal Residence Trust (QPRT) Attorney

For many of us, our homes are our most valuable assets. Creating a qualified personal residence trust (QPRT) allows you to remove your home from your estate. Doing so can reduce or possibly eliminate estate and gift taxes. Your beneficiary can avoid probate and protect your home from litigation and creditors.  This is often used as a tactic for advanced estate planning.

Attorney Christopher Heritage of Heritage Legal has an in-depth understanding of estate planning tools, including QPRT. If you have a primary or secondary home that you intend to give to your children or others, a California qualified personal residence trust may be able to help you meet your goals. Contact Heritage Legal today to schedule your initial consultation and learn more about how we can help you create a comprehensive estate plan that meets your needs and goals. 

A QPRT Can Help You Avoid or Reduce Estate Taxes

A QPRT is an irrevocable trust in which the grantor gives their house to their chosen beneficiary. Parents will often give their homes to their children using a QPRT. There are two advantages of using QRPT, a type of irrevocable trust. First, it can help you remove your home from your estate. 

Additionally, reducing the overall value of your estate can help your beneficiaries avoid paying expensive estate taxes after you pass away. Estate taxes can take as much as 55 percent of your estate. Depending on the value of your estate and home, you could save your beneficiaries hundreds of thousands of dollars, if not more, by placing your home into a QPRT. 

Avoiding the Probate Process Through a QPRT

When you place your personal residence into an irrevocable trust, the beneficiary of the trust will not have to go through the probate process. Without a trust, the beneficiary will need to wait for the probate court to administer your estate. This process can be expensive and time-consuming. 

When you create a trust, you, as the grantor, can set forth the terms of the trust, including when and how ownership of your home will transfer to your loved one. Many grantors allow their loved ones to take ownership of the home through the trust and medially after their death. Avoiding the probate process will save your loved one significant time, money, and stress.

Can I Continue Living in My Home with a QPRT?

Yes, you can continue living in your home after you have transferred ownership of your home into a QPRT. As you continue living in your QPRT home, you will have a legal right to claim income tax deductions during this term. The IRS considers QPRT trusts as grantor trusts. As a result, the IRS treats the trust as a gift for income tax purposes. For example, suppose a retired couple would like to pass their family home to their only child. However, they aren't ready to move out of their home yet. They decide to transfer home ownership into a QPRT to reduce their estate tax liabilities. 

When they set up the trust, the home was worth $500,000. After 20 years, the home is now valued at $750,000. The appreciation of the home happened tax-free because the home was placed into a QPRT. If the terms of the trust expire in 20 years, the couple can pass the property to their child tax-free, saving significant money.

Factors to Consider When Setting Up a QPRT Trust

When deciding whether or not to create a QPRT trust, you should consider some key factors. These types of trust are irrevocable, meaning you cannot revoke the trust. You should also consider the terms of the trust. As the grantor, you will be able to define the length of time you can remain in your residence, a period also known as the retained income. 

You should also consider who you would like to be the trust's beneficiary beneficiaries. For example, if you have multiple adult children, do you plan to give them an ownership share of the home? Will they be able to work together to determine what to do going forward? Or would you rather give the home to one child and give the other children other assets of equal value? These are all considerations you should think through before you decide to draft your trust.

How to Create a QPRT Trust in California

When you create a QPRT trust, it will be funded with your residential property. You will need to record a new deed showing that your trust owns the property after you've created the trust. You also need to establish a fair market value at the transfer date through an appraisal. The appraiser's value will also inform gift tax liability. As the grantor, you will need to report gift tax to the IRS by filing a form 709 the year you transfer the home into your trust. The IRS deems this transfer a gift. You can live in the property during the trust and manage it. 

You also benefit from income tax deductions until this period ends. When the term of the trust ends, the home will be transferred to the beneficiary by recording a new deed from the trust to the named beneficiary. If you would like to continue living in your home after the terms of the trust have expired, you will be required to pay fair market rent. Doing so will transfer more assets to your beneficiaries while reducing tax liability.

Discuss Your Estate Plan with an Experienced Palm Springs Attorney

Are you considering giving your home to your child, children, or another beneficiary, but you'd like to remain living in your home? If so, a qualified personal residence trust may be the best option for your estate plan. Attorney Christopher Heritage is here to help you understand all of your options. If a QPRT would work well for your situation, he can help you draft a thorough and legally-binding QPRT. He will also review your other state planning documents and make sure there isn't anything you need to update or add to protect yourself and your assets. Contact Heritage Legal today to schedule your free case evaluation.