Investopedia

Continue to Site »

Qualified Personal Residence Trust – QPRT

Filed Under » ,
Dictionary Says

Definition of 'Qualified Personal Residence Trust – QPRT '

A specific type of trust that allows its creator to remove a personal home from his or her estate for the purpose of reducing the amount of gift tax that is incurred when transferring assets to a beneficiary. Qualified Personal Residence Trusts allow for the owner of the residence to remain living on the property for a period of time with 'retained interest' (by and large greater than 0%) in the house; once that period is over, the interest remaining in the premises is transferred to the beneficiaries as 'remainder interest.'

Depending on the length of the trust, the value of the property during the retained interest period is calculated based on Applicable Federal Rates provided by the IRS. Because a fraction of the value is retained by the owner, the gift value of the property is lower than its fair market value, thus lowering its incurred gift tax. This tax can also be lowered with a unified credit.
Investopedia Says

Investopedia explains 'Qualified Personal Residence Trust – QPRT '

Generally speaking, a QPRT is useful when the trust expires prior to the death of the grantor. If the grantor dies before the term, the property is included in the estate and is subject to tax. The risk lies in determining the length of the trust agreement coupled with the likelihood that the grantor will pass away before the expiration date. Theoretically, longer-term trusts benefit from smaller remainder interest given to the beneficiaries, which in turn reduces the gift tax; however, this is only advantageous to younger trust holders who have a lower possibility of passing away prior to the trust end date.

Articles Of Interest

  1.

    Why You Shouldn't Die In 2013

    Increases in estate tax rates and possible fiscal cliff implications will make things more difficult when it comes to arrangements for your death.

  2. Tax-Efficient Wealth Transfer

    Taxpayers with large taxable estates were required to take steps to reduce them before 2011.

  3. What To Do When You're Left Out Of A Will

    Discover the legal steps you can take if you are left out of a will and if fighting is worth the effort.

  4. Tax-Saving Advice For IRA Holders

    Be informed about benefits and deductions that may apply to you and avoid costly mistakes on your return.

  5. Relationships And Retirement Planning

    Older couples have many things to consider when it comes to financial planning, including wills and estate planning.

  6. What Is A Will And Why Do I Need One?

    Putting this document together will save your family time and money, and give you peace of mind.

  7. Protect Your Personal Assets

    A family limited partnership (FLP) can go a long way toward securing your family's property.

  8. I want to transfer my house title to my child, what are the costs and tax consequences of doing so?

    The costs associated with a deed transfer will vary by state and by how the transfer is accomplished. Filing a deed yourself may be the cheapest method, but it will require quite a bit of homework ...

  9. 5 Misconceptions About A Fiduciary

    Having knowledge of what a fiduciary is will not only impress your friends at a party, but it will also help you understand what you should expect from your broker.

  10. Gifting Your Retirement Assets To Charity

    There are several things to consider when it comes to this type of charitable giving. Make sure you're well informed.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => Estate Planning [1] => Personal Finance [2] => SEG (Head Of Households) ) time:8ms