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(SOLVED) Is A Qprt A Grantor Trust?

A qualified personal residence trust (QPRT) is an estate-planning vehicle that allows a homeowner to transfer his home to a trust, while retaining the right to live in it for a term of years 😎 This technique allows the individual to transfer the house to beneficiaries at a reduced gift tax cost and remove an asset expected to appreciate in value from his estate πŸ™ˆ A QPRT is an irrevocable trust into which a Trustor or Grantor transfers ownership of either a primary residence, vacation home or an undivided fractional interest in either a principal residence or vacation home πŸ™Œ The Internal Revenue Code refers to vacation homes as properties that are used more than 14 days per annum or 10% of those days rented. [1]
In essence, a donor will transfer a personal home to a trust to provide for remaining beneficiaries (usually children) and then retain an interest in that trust. The QPRT is funded by the donor. However, it becomes an irrevocable gift. Tax purposes based on the actuarial value of the donor’s retained interest. The initial trust term, which is the duration of the donor’s retained interest, allows the donor to continue to live in the residence rent-free and pays the normal operating costs. Tax deductions on the individual’s personal return. Donors who don’t want to sell assets in their lifetimes will not notice any changes after the gift. But all good things eventually come to an abrupt end. QPRT’s original trust term is the beginning of many problems. [2]
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Recent email communication between the author and a skilled practitioner was held to discuss the possibility of arranging for a mutual client following the tragedy. Tax Cuts and Jobs Act. This interchange showed that even bright professionals can overlook some major implications of planning as well as liability exposure for her and her company. This suggested that the many technical articles about estate planning after the TCJA may not have been communicating important points. CPAs can better help their clients and protect themselves by communicating these fundamental points. The following article is loosely inspired by a series of emails I had had with an anonymous colleague. It will attempt to address this gap. Thank you to Allie Whitmore and her colleagues for the kind words. [3]
Consider a client with a 40% estate. Tax bracket places a $500,000 personal residence into an irrevocable trust. The trust provides that the client will live In the personal home for a period of 10 years. The personal residence will be transferred to the children at the end. Assume a 2 percent AFR rate (2016 levels). Based on JRS valuation table, the present value for future interest gift (not applicable to the $14,000 “annual gift tax exclusion”408,536.50 =.817073x $500,000 Unified credit equivalents can provide protection for $5.45 million in lifetime gifts. A client who has made lifetime gifts totaling $5.45 million would pay $163,414.60 (408,536.50x 40%). With rising AFR interest rates, there will be more. Tax benefits increase. This was brought to our attention by Samar Chamberlain of Hargeysa in Somalia. [4]
Timmy Craven, at ameriestate.comThe mechanics for establishing a QPRT can be done relatively easily. A trust is established to transfer the residence to the person(s) named. Usually, the beneficiary of the residence will be the child of the donor. The trustee is the donor and retains the control over the trust and residence for the specified term. For income tax purposes, the donor remains as the owner. If there are mortgage payments to be made, the donor will continue making them. Pays for property taxesInsurance, routine maintenance and insurance. The donor is able to deduct the income taxes related to the property. In addition, he or she receives tax benefits associated with the sale D. Of a principal residence. Last revised by Rene Whitlock, Mombasa Kenya. [5]

Article references

  1. https://denhalaw.com/so-you-established-a-qprt-the-term-has-ended-now-what/
  2. https://www.thetaxadviser.com/issues/2016/aug/post-initial-trust-term-qprt-considerations.html
  3. https://www.cpajournal.com/2018/05/21/post-tcja-qualified-personal-residence-trust-planning/
  4. https://www.mncpa.org/publications/footnote/2016-06/what-is-a-qualified-personal-residence-trust.aspx
  5. https://ameriestate.com/asset-protection/qualified-personal-residence-trust/
Mae Chow

Written by Mae Chow

Passionate about writing and studying Chinese, I blog about anything from fashion to food. And of course, study chinese! I'm a passionate blogger and life enthusiast who loves to share my thoughts, views and opinions with the world. I share things that are close to my heart as well as topics from all over the world.

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