For many people in New York, the property that they call home is their most valuable asset. Most homeowners would like to pass their home and the other assets that they have accumulated over their lifetime to members of their family in their will. However, a home that has significantly grown in value over the years may cut into a person’s gift and estate tax exemptions and the beneficiaries’ inheritance.
Setting up a qualified personal residence trust may allow an individual to give the gift of a home to their loved ones while minimizing estate and gift tax consequences A QPRT is a trust that holds the deed to a home for a certain period of time before passing the deed to the beneficiary of the trust. One of the main benefits of a QPRT is that it allows a homeowner to freeze the value of their home at the date that the trust was created.
While a home is being held in a QPRT, the original homeowner can live in the home as usual. After the trust terminates, the original homeowner pays rent to the beneficiary of the trust until the homeowner passes away or stops living in the home. The rent that is paid to the new homeowner is not considered a gift, so it is not subject to any gift taxes.
A person who is considering setting up a QPRT may want to speak with an attorney first. An estate planning attorney to see whether it is an appropriate vehicle for them. There are many rules that must be followed in order for it to be valid that the attoeny can explain.