- Find Attorney
Qualified Personal Residence Trust is an irrevocable trust which places the personal residence in a trust either for the benefit of one’s spouse and children or for a charity. The trust is created and controlled by the homeowner-grantor but the title to the residence is transferred to the trust. The grantor-trustee may retain the right to dwell in the residence for a specified term of years. During the grantor's stay s/he is not required to pay rent but is responsible for related expenses like maintenance and taxes. If the grantor wishes to extend his or her stay beyond the predetermined term of years the grantor will have to pay fair market rent. The trust can receive and hold additional cash to pay for trust expenses, mortgage installments, and improvements to the residence.
If the grantor lives to the end of the specified period, the house (including all post-gift appreciation) passes to his or her children or other named beneficiaries free of any additional federal or state estate or gift taxes. If the grantor dies before the end of the period, the house is included in the grantor’s estate for estate tax purposes. This type of trust was created and passed by the US Congress in 1990, when concerns arose about inheritors of a house having to sell gifted property because they couldn’t pay the taxes when ownership was transferred to them.