Your vacation home and estate taxesSubmitted by Financial Planning Solutions, LLC on February 28th, 2019
What's a QPRT?
This stands for a Qualified Personal Residence Trust.
Okay, what's that? In simple terms, a QPRT is trust that allows one to transfer the ownership of one's personal residence or vacation home to a family member while reducing the potential estate tax one might otherwise pay.
This type of trust allows you to transfer your beach house for example to the trust but allows you to still use the property during the term of the trust.
Why is this important? Well, let's say you have a beach house down the Cape and you would like to keep it in the family for future generations. However, you don't want to make an outright gift today as that has potential gift tax implications. You also want to ensure that you can use the property for a set number of years.
By utilizing this type of trust, you have full use of the house as before but you receive a significant tax break as the law allows you to discount the value of the house for estate tax purposes.
The way this works is the IRS allows you to calculate the present value of the house using an interest rate determined by the IRS. This discounted rate values the house at a lesser amount than the actual value today.
This blog post is pretty basic and these QPRT's have some complexities so you really want to enlist the help of a good estate planning lawyer and tax accountant to see if this makes sense.
If you have any questions, give us a call.
We are here to help.
All the best.
Rick Fingerman, CFP®, CDFA™, CCPS®
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.