Qualified Personal Residence Trust
What Does Qualified Personal Residence Trust Mean?
A qualified personal residence trust is a specific type of trust that enables the creator to remove their personal home from their estate, thereby reducing the gift tax incurred when transferring the asset to a beneficiary. This trust allows the homeowner to retain the right to live in the property for a specified period, with a retained interest in the residence. After this period ends, the remaining interest in the property is transferred to the beneficiaries as a remainder interest.
Insuranceopedia Explains Qualified Personal Residence Trust
The value of the property during the period of retained interest is calculated based on applicable rates, which depend on the length of the trust. A qualified personal residence trust can be beneficial if the creator intends to transfer their residence to a family member in the future and wishes to reduce the overall transfer tax costs. Typically, a qualified personal residence trust is irrevocable, meaning the creator cannot regain ownership of the estate. When the trust term expires, the property is automatically transferred to the designated beneficiaries.
