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What is a qualified personal residence trust?

On Behalf of | Jun 11, 2019 | trust & probate administration |

When it comes to estate planning, things change often. Not just with your personal situation but also with the law and how that impacts the decisions you have made about your assets. Recent changes may have you rethinking the use of a qualified personal residence trust in Indiana, according to The CPA Journal.

A QPRT is where you transfer the ownership of your home to an heir to take advantage of the lower gift tax rate. You can specify in the trust how long you will in the home after the creation of the trust. In the past, this greatly reduced the value of your estate thus saving money on estate taxes. However, that is no longer the case, at least for right now.

The passing of the Tax Cuts and Jobs Act raised the tax exemption so much that you probably no longer need a QPRT to avoid high taxation because you can exempt your home. The issue, though, is this higher exemption level is not permanent. It will drop by half in 2025.

So, whether you use a QPRT and whether it is actually going to help depends largely on when you die. For most people, that is not a date you can pin down, so it really is a gamble. If you die before 2025, you do not really need the QPRT, but if you die in 2026, your heirs will wish you did have one. It is a tricky situation that requires a lot of careful thought and planning. This information is for education and is not legal advice.