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Qualified Personal Residence Trusts.

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Qualified Personal Residence Trusts
Introduction
There are countless tax saving strategies related to gift and estate taxes that can be utilized by taxpayers in the form of estate freezing or other estate planning methods. Estate freezing is a strategy for asset management that can use trusts to “minimize taxes on future appreciation” of assets, taking the burden away from any heirs. There are endless types of estate freezing that taxpayers can use, ranging from annuities to intentionally defective grantor trusts. One illustration of estate freezing that can be used is a qualified personal residence trust, which is more commonly referred to as a QPRT. In short, these trusts are a form of estate planning that have tax advantages…show more content…
A lot of details are decided upon when writing up the agreement, including determining the trustees, the “retained income period,” or the amount of time that the person owning the residence will be allowed to live there rent-free, and who the beneficiaries are. This retained income period is so important because of the consequences associated with it if one outlives the term or dies during it. The choice of this term period is incredibly “subjective”, but people tend to look at the “life expectancy tables used by the IRS” to get a good idea of what amount of years to use. Since tax advantages are lost if a person is to outlive their retained income period, the years picked should be lower than one’s actual expectancy, and they should also take into consideration any health problems or other issues affecting their life expectancy.
After writing the trust agreement, the next role for the individual is to put their residence into the qualified personal residence trust. This brings up the question of what kind of residence is allowed to fund one of these trusts. A QPRT may be funded with a principal residence, which is just the main home that one lives in, or a personal residence, such as a vacation home if the person lives there for at least fourteen days of the year. According to the Internal
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