QPRT
Back to GlossaryDefinition
A specific type of irrevocable trust that allows its creator to remove a personal home from his or her estate for the purpose of reducing the amount of gift tax that is incurred when transferring assets to a beneficiary.
Summary
QPRT (Qualified Personal Residence Trust) is an advanced estate planning technique where a homeowner transfers their residence to an irrevocable trust while retaining the right to live in the home for a specified period. After this period ends, the residence passes to beneficiaries (typically children) at a reduced gift tax value, potentially saving significant estate and gift taxes. The tax benefit comes from valuing the gift at less than the home's current fair market value, since the beneficiaries must wait to receive full ownership.
Usage Context
Understanding QPRTs is important when studying advanced estate planning strategies, particularly for high-net-worth clients seeking to minimize estate and gift taxes while transferring real estate to the next generation.
Common Confusions
- Thinking you maintain ownership of the home after the trust term expires
- Confusing QPRTs with other grantor retained interest trusts (GRATs/GRUTs)
- Misunderstanding that the gift occurs when the trust is created, not when the term ends
- Assuming the trust provides income tax benefits (it doesn't)
