How Does a Qualified Personal Residence Trust Work?
Trusts are often part of estate plans in Gwinnett County and throughout Georgia, and they can serve many different purposes — both for the party creating the trust (the grantor) and for the party receiving assets from the trust (the beneficiary). Grantors frequently create trusts so that the assets contained in them can be passed to beneficiaries without going through the probate process. Certain types of trusts are designed specifically to benefit adults with disabilities, while others are intended to help grantors become eligible for Medicaid coverage of long-term care. There are also various trusts that are part of asset-protection strategies, including limiting the estate tax burden after a grantor’s death.
A qualified personal residence trust (QPRT) is one of the types of trusts that is designed for asset protection. It is a type of irrevocable trust, which means it cannot be amended or canceled once the grantor has established it. There are benefits and limitations to QPRTs, and our Gwinnett County estate planning lawyers can explain in more detail.
Function of a Qualified Personal Residence Trust
How do QPRTs work? This type of trust allows a grantor to place the value of their personal residence (i.e., their home) into the trust so that it will not be part of their taxable estate upon death. After the grantor’s death, the residence can also be transferred to the beneficiaries without probate. When the value of a home is transferred to a QPRT, the grantor can continue to live in the home for a set period of time, after which point the grantor may need to leave the residence or pay to rent the property. However, if the set period of time has not expired before the grantor dies, then the trust will not function as described above — the grantor must survive the trust.
The value of the residence is determined at the time it is transferred to the trust.
Requirements for a QPRT
In order for a QPRT to function as the grantor intends, there are specific IRS requirements that must be met:
- Grantor must survive the trust (grantor cannot have a life estate in the property, or be living in the residence at the time of their death and before the set period expires);
- Grantor may only continue to reside in the property after the set period of time ends by paying market-value rent on the property, which will go to the beneficiaries; and
- Only two residences can be transferred to a QPRT, and they must actually be residences — real property that is not commercial property.
Contact Our Norcross Estate Planning Attorneys Today for Help
Whether you have questions about establishing a qualified personal residence trust, or you want to find out more about other asset protection and estate planning strategies for older adults who may require long-term care, one of the experienced Norcross estate planning lawyers at Bowman Law Firm is here to assist you. We can answer any questions you have, and we can begin working with you on a wide range of estate planning and asset protection strategies for yourself or for your elderly parent. Contact us to learn more about the estate planning services we provide in Gwinnett County.
Sources:
irs.gov/pub/irs-drop/rp-03-42.pdf
law.justia.com/codes/georgia/title-53/
