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A QPRT is established when the grantor irrevocably transfers a personal residence to the trust for a fixed period of time, for instance 10 or 20 years, during which the grantor retains the unrestricted right to occupy the property as a personal residence.
What then happens if the residence is sold during the QPRT term?
The PRT and QPRT are irrevocable inter vivos trust instruments designed to reduce the gift and estate tax costs involved in transferring personal residences to family members.
Such retained annuity, unitrust, and income (or use) interests are generally found in GRITs, GRATs, GRUTs, PRTs, QPRTs, CRATs, and CRUTs, but can be found in other trusts as well.
The transfer of the house to the QPRT is treated, for gift tax purposes, as a gift of the remainder interest in the house that the trust beneficiaries will receive at the end of the trust term.
Developmental history of the QPRT suicide risk management inventory.
A Grantor Retained Annuity Trust (GRAT) is similar to a QPRT, but instead of holding a personal residence, the trust holds other assets, such as stocks, bonds, mutual funds, and income producing real estate.
Choate, The QPRT Manual (Boston, MA: Ataxplan Publications), 800-247-6553
The QPRT requires a trust agreement with provisions that are fairly standard.
The QPRT is very similar in nature to the grantor retained interest trusts described above.
When you create a QPRT, the IRS considers that you have made a gift of your home to the trust's beneficiaries.
After the term of the QPRT (typically from 5 to 15 years), the residence is permanently out of your estate.
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