There is a special type of trust referred to as a personal residence trust (PRT), or qualified personal residence trust (QPRT). To describe it in simplified terms, creating a PRT means transferring your residence (that you own) into a trust. As the grantor, you will be able to live in the house for whatever length of time is specified by the trust. After that, as in a remainder charitable trust, the remainder beneficiaries will gain the residence. One major aspect of my job as an estate planning attorney is to help my clients protect their assets now, for the benefit of their heirs, later. And I believe that, depending on your situation, this type of trust could be beneficial to you.
Placing your residence in a QPRT does several things: it removes the residence from the grantor’s estate. It is, for tax purposes, considered a gift, but also may not be subject to any taxes. (That’s the essence of the “qualified” designation, and it is also the complicated part, relating to the how the home is valued and the level of retained interest of the grantor.) There are other factors, such as the age of the grantor, and how long the grantor may or may not remain in the home.
Yes, it sounds complicated, but basically there are two reasons a QPRT may be utilized. For example, if the owner of the home wishes to protect it for his or her heirs, this trust can help achieve that. Also, if the grantor has reason to believe the home could be lost due to a lawsuit such as a medical malpractice suit, the QPRT removes the home from the grantor’s assets, so to speak, and protects it that way as well.
Please keep in mind that this blog is meant only to present overviews and information, and is not meant as legal advice or recommended action. Specialized trusts such as the ones discussed above are among many possible legal entities that can comprise part of a comprehensive estate plan. I encourage you to bring your questions, concerns and issues regarding any aspect of estate planning to me for discussion, resolution, and, if you decide to proceed, we’ll develop a plan that meets all your needs.818.956.9200
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