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Home » Estate Planning » Qualified Personal Residence Trusts & Your Estate

Qualified Personal Residence Trusts & Your Estate

March 14, 2011 by Anthony Moccia Leave a Comment

The recent dip in the housing market has changed the playing field quite a bit going forward, but the fact is that home ownership has always been at the core of the American dream. Owning a home provided everyone with the opportunity to efficiently build wealth while enjoying a steadily increasing standard of living.

For this reason it is not uncommon for people who are engaged in the process of estate planning to recognize that their home is the most viable asset that they possess. And clearly, in many cases this domicile represents something very special to the people who ultimately will be inheriting it.

Sadly, many people who are inheriting real property have to sell the family home to pay the estate tax. One way that you can remove the full value of your home from your overall estate for tax purposes while still living in it for as long as you would like to is through the creation of a qualified personal residence trust.

You place the home in the trust, appointed a trustee, and name a beneficiary or beneficiaries. When you’re drawing up the trust agreement you state a term during which you will remain in the home. You’re not required to pay rent during this interim but you do have to make property tax payments and pick up the maintenance costs. Through the creation of the trust you have effectively removed the home’s value from your estate.

At the end of the trust term your beneficiaries, presumably your children, assume ownership of the home. This transfer constitutes a taxable gift but the full market value of the house is not used to determine the amount of tax that is due. The taxable value of the home is reduced by your retained interest, resulting in a significant savings. If this taxable value falls below your unused portion of the combined gift/estate tax exclusion the property winds up being passed to your heirs in a completely tax-free manner.

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Anthony Moccia
Anthony Moccia
Anthony Moccia is an attorney and partner at The Law Offices of Kobrick & Moccia.His practice focuses on estate planning and elder law.He is a member of the New York State and Nassau County Bar Associations.He frequently presents free seminars on wills & living trusts to area residents and his seminars are said to be “informative, entertaining & easy to understand.”
Anthony Moccia
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Filed Under: Estate Planning Tagged With: Elder Law, Estate Planning, Inheritance Planning

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