While a qualified personal residence trust may be less necessary for people in New York and others throughout the country today because of the large exemptions for estate and gift tax, many people will still have these as part of their estate plan. A QPRT works by removing the home from a person’s ownership and placing it in a trust for a fixed amount of time. This reduces taxes on the home at the person’s death. If the person dies before the end of the fixed term, the benefits are lost. Neither the grantor nor the spouse can repurchase the home at the end of the fixed term.
There are several options for the home once the term is up if the grantor is still alive. The initial beneficiary might be the spouse, and that person could be allowed to use the residence without paying rent. The home could go into a trust for the benefit of the children or it could go directly to the children.
