Qualified Personal Residence Trust

An alternative to insurance for protecting your personal residence.


Form a Qualified Personal Residence Trust With Anderson

How do you protect your personal residence from creditors if your state does not have high homestead exemptions? Many professionals will recommend an umbrella policy, but insurance companies are eager to deny claims, and that is only if your item has coverage in the first place! One sure way to protect your home is to form a Qualified Personal Residence Trust (QPRT), an irrevocable trust established to hold legal title to a residence or vacation home while you live in it.

A QPRT owns your home but allows you to maintain residency in the home for a specified length of time, while still retaining all the rights of a homeowner. QPRTs are also especially good at minimizing a person’s estate for federal or state estate tax purposes. Although law treats a transfer of property to a QPRT as a taxable gift, the gift’s value derives from the present value of the remainder beneficiary’s right to receive the property at the end of the QPRT term.

For example, if you were age 65, you could create a QPRT, transfer your residence to the QPRT for an 18-year term (or whatever length of time you choose), and then have the property pass to your children at the end of that 18-year term. Let’s assume the residence value is at $1,000,000. Based on IRS tables, you would receive treatment as having made a gift to your children valued at only $389,955. Because the estate tax rate can surpass 50% (more than $500,000) between state and federal, this would result in significant estate tax savings (roughly $110,045). You would have favorably transferred an asset worth $1,000,000 to your children by using only $389,955 of your estate and gift tax credit ($5,450,000).

Another QPRT tax benefit is the avoidance of estate and gift taxes on the residence’s future appreciation. Based on the prior example, assuming that the $1,000,000 property appreciates at 4% per year for the 18-year term, the residence would be valued at $2,025,816 at term’s end. All of the appreciation during that 18-year term would not increase the gift price amount passed to your children, in respect to the estate tax. Thus, by making a gift valued for estate and gift tax purposes at $389,955, you would efficiently transfer an asset worth over $2,000,000. Assuming your estate is in the current maximum 40% federal estate tax bracket, this transfer would save you $800,000 in federal estate taxes!

Experience You Can Trust

Asset protection and tax minimization are the key reasons behind forming a qualified personal trust, and those two reasons are why we at Anderson come to work every day. We find the asset protection strategy that is right for you, and a qualified personal trust is one of the many solutions we can implement to help you achieve your financial goals. We can also discuss whether another trust, like a Dynasty Trust, Asset Protection Trust, or an Irrevocable Life Insurance Trust might suit you better. Let us find a solution that best suits your needs.

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St. Louis, MO



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Retirement and financial planning and wealth management strategies to maximize what you already have.


What You Can Expect When Forming a Qualified Personal Residence Trust with Anderson

Once our advisors have determined that a QPRT is the best protection for you, your trust will be formed to meet your needs and to include all your desired specifications, like the length of term and beneficiaries. During the term stated in your trust, you will maintain all of the same benefits as a homeowner, such as the ability to sell the property and purchase a new residence in the name of the trust, the ability to sell the property and invest the proceeds for an income stream, or a combination of the two scenarios.

After the stated term has expired, the ownership transfers to the beneficiaries, usually the grantor’s children. At this time, the QPRT can continue as an irrevocable trust for the benefit of the remainder beneficiaries, rather than being distributed outright to the remainder beneficiaries, such as the children of the Grantor. If you live in a state that does not provide quality homestead exemptions and an umbrella policy does not provide you the protection you need, contact us today to discuss setting up a Qualified Personal Residence Trust.



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