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How to Gift A Residence


By Stuart G. Schmidt, Esq.

AA Qualified Personal Residence Trust (“QPRT”) is a gifting technique that can save hundreds of thousands of dollars in the Federal Estate and Gift Tax. By gifting a residence or vacation home to this type of Trust, property, that might otherwise have to be sold to pay this transfer tax, can be kept in the family.

The Value of a QPRT Gift

Upon the transfer of property, the Federal Government assesses a tax based on the fair market value of the property transferred. If the property is transferred during life, the gift tax applies and if the transfer is made at death, the estate tax applies. Under this estate and gift tax system, a crucial aspect of tax planning is to reduce the value of the property transferred. By lowering the value of the property transferred, the transfer tax is reduced. A Qualified Personal Residence Trust (“QPRT”) reduces the value of the property transferred because the one making the gift retains a valuable right, i.e. the right to live in the property for a chosen number of years. This retained right to use the property can reduce the value of the gift and thus the tax by as much as 80%. The actual savings in tax is based on the number of years one retains an interest in the QPRT, the donor’s age and the Applicable Federal Interest Rate.

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