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.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Principal Residence

    The primary ...
  2. Inter-Vivos Trust

    A fiduciary ...
  3. Gift

    Property, money ...
  4. Testamentary Trust

    A legal and ...
  5. Trust

    A fiduciary ...
  6. Beneficiary Of Trust

    A beneficiary of ...
  7. Gift Tax

    A federal tax ...
  8. Irrevocable Beneficiary

    A beneficiary in ...
  9. Ultimogeniture

    A system of ...
  10. Laughing Heir

    A distant ...

Articles Of Interest

  1. Tax-Efficient Wealth Transfer

    Taxpayers with large taxable estates were required to take steps to reduce them before 2011.
  2. 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.
  3. Tax-Saving Advice For IRA Holders

    Be informed about benefits and deductions that may apply to you and avoid costly mistakes on your return.
  4. 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.
  5. Protect Your Personal Assets

    A family limited partnership (FLP) can go a long way toward securing your family's property.
  6. 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.
  7. Top 7 Estate Planning Mistakes

    Many people try to avoid this process altogether, making things difficult for heirs.
  8. Ethical Wills Share Final Thoughts With Heirs

    This document allows a testator, the person making the will, to leave a personal legacy.
  9. 6 Ways To Lose Your Estate

    Find out why you shouldn't put off putting your affairs in order.
  10. Should You Convert Your IRA?

    Discover the factors you must weigh to make this decision.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center