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Category: Gift Tax

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Creating a Successful Business Exit Plan

Motley Fool’s recent article titled “What Robert Redford’s Sale of Sundance Can Teach Investors About Exit Planning” says that, in announcing the sale, Redford told the Salt Lake Tribune that he’s been thinking of selling for several years. However, he wanted to find the right partners. Broadreach and Cedar plan to upgrade the resort, add hotel rooms and build a new inn. The companies have also said that they will keep the resort sustainable and practicing measured growth, as well as also continuing to host the Sundance Film Festival. So how did he set about creating a successful business exit plan?

The 2,600-acre resort has 1,845 acres of land saved from future development through a conservation easement and protective covenants. The 84-year-old actor has had a lifelong interest in the environment and in land stewardship. Redford and his family have also arranged with Utah Open Lands to create the Redford Family Elk Meadows Preserve at the base of Mt. Timpanogos. The gift will reduce Redford’s tax liability on his estate.

Both Broadreach and Cedar have extensive hospitality experience, but neither looks to have much ski resort experience. However, they’re working with Bill Jensen, an industry legend, who recently left his role as CEO of Telluride Ski and Golf Resort in Colorado.

Creating a successful business exit plan can be difficult—in part, because people don’t like to address such unwelcome topics. Most investors don’t have the luxury of waiting years to find the right buyer, but the Redford deal does show that planning ahead may be critical to creating a mechanism that supports the vision for the property.

When selling a large investment property, you must first understand why you’re selling, and your desired end result. Of course, a return on investment is nice, but there may be other considerations, like in Redford’s case. Another key is ascertaining the updated worth of what you’re selling. Get a valuation, especially with an irreplaceable asset.

The structure of the sale is important. You will likely be liable for tax on your capital gains, so ask an attorney. If you’re also structuring your estate plans at the same time, you’ll need to know what amount you can give and what your heirs may have to pay. Talk to an experienced estate planning attorney before you begin creating a business exit plan to be certain that you’re covering all the bases.

If you are interested in learning more about succession planning and other business related planning topics, please visit our previous posts. 

Reference: Motley Fool (Dec. 12, 2020) “What Robert Redford’s Sale of Sundance Can Teach Investors About Exit Planning”

 

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Should a GRAT Be Part of Your Estate Plan?

A Grantor-Retained Annuity Trust, or GRAT, is funded by the grantor, the person who creates the trust, in exchange for a stream of annuity payments at a predetermined interest rate—the IRS Section 7520 rate. The interest rate in December 2020 is 0.6%, as reported in the article “Transferring Wealth With This Trust Can Yield Big Tax Advantages” from Financial Advisor. Should a GRAT be part of your estate plan?

GRAT assets need only appreciate greater than the Section 7520 rate over the term of the trust, and any excess earnings will pass to beneficiaries, or to an ongoing trust for beneficiaries with no gift or estate tax.

Because the grantor takes back the amount equal to that which was transferred to the trust (often two or three years), which is set by the IRS when the trust is funded, future appreciation over and above the interest rate passes gift-tax free.

There’s little upkeep. Once the trust agreement is in place, a gift tax return needs to be filed once a year. If the trust is set up without a tax ID number, there’s no need to file an income tax return.

The grantor is responsible for the income generated by the asset in the GRAT, but that’s it. If the value of the property is increased following an audit, the gift won’t be increased but the annuity will. If the GRAT property decreases in value, the only out of pocket is the set-up costs.

Assets in a GRAT may be anything from an investment portfolio to shares in a closely held business.

Most GRATs are designed to have the value of the retained annuity be equal to the value of the property that is transferred to the GRAT. If the values are equal, then the amount of the gift for tax purposes is zero, since the value of the transfer less the annuity value is zero.

GRATs are not for everyone. The success of the GRAT depends upon the success of the underlying assets. If they don’t appreciate as expected, then there might not be a significant amount transferred out of the estate after paying for the legal, accounting and appraisal fees. If the grantor dies during the term of the GRAT before payments back to the grantor have ended, the GRAT will be unsuccessful.

Generation skipping transfers cannot utilize GRATS, since the generation skipping tax exemption may not be applied to a GRAT, until the grantor’s death.

Ask your estate planning attorney about whether a GRAT should be a part of your estate plan. If a GRAT is not a good fit, they will know about many other tools available.

If you would like to learn more about how GRATS can play a role in your estate planning, please visit our previous posts. 

Reference: Financial Advisor (Nov. 30, 2020) “Transferring Wealth With This Trust Can Yield Big Tax Advantages”

 

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Implementing Succession Plans Before Year Ends

Anyone with a taxable estate that includes an operating business should be looking into the efficacy of making gifts in 2020 to take advantage of a unique set of circumstances, advises the article “Why Now is the Right Time to Execute Succession Plans” from Worth. This could include implementing succession plans before the year ends.

The federal exemption from transfer taxes is at a historically high level. Individuals may transfer up to $11.58 million of assets during their lifetime without incurring federal gift, estate or generation skipping transfer tax (GST). The current maximum federal gift and estate tax rate and the current maximum federal GST tax rate is now 40 percent. As the law stands now, this amount is not scheduled to be reduced until the end of 2025, but whether that will remain is anyone’s guess.

The IRS has stated that it will not attempt a claw back of taxes if the exemption amount decreases soon, so taxpayers who put off taking action before December 31, 2020 will miss out.

Lower Value Another Incentive to Develop a Succession Plan

It is important not forget the impact of the global pandemic. Valuations in some parts of public markets continue to be high, but many private companies have lost a lot of value. The lower appraised values can be beneficial for succession planning. If a business owner is willing to transfer all or a portion of the private company to successive generations now, that lowered appraisal value means that more wealth can be shifted. There is the possibility of growth in the future, free of gift, estate, or GST tax.

How Do Interest Rates Impact Succession Plans?

Many strategies used to transfer assets between generations are based on interest rates which are near the lowest they have ever been. Every month, the IRS releases the updated Section 7520 and Applicable Federal Rates (AFR). These are the rates used for transfer techniques like GRATs and intra-family loans. In October, the 7520 rate was 40 basis points (“bps”), and the Mid-Term Annual AFR, used for loans with terms of three to nine years was 39 bps.

Succession Plans Take Time to Create

This unique combination of exemptions, low business valuations and low interest rates is likely to lead many business owners to their estate planning attorney’s offices to implement succession plans before the calendar years ends. The smart move is to contact your estate planning attorney, CPA, and financial advisor as soon as possible to discuss options, and get succession plans going. There will likely be a more-than-usual last minute rush to complete many financial and legal tasks this December, and getting started as early as possible will make it more likely that your succession plan can be completed before December 31, 2020.

If you would like to learn more about gifting, and other means of reducing estate taxes, please visit our previous posts. 

Reference: Worth (Nov. 2, 2020) “Why Now is the Right Time to Execute Succession Plans”

 

 

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Creating a GRIT Could Have Some Benefits

Creating a GRIT (grantor retained income trust) could have some benefits, particularly if you’re seeking for ways to minimize taxes in your estate plan. A GRIT is a type of irrevocable trust. This means that the transfer of assets is permanent and can’t be reversed.

Yahoo Finance’s recent article entitled “What Is a Grantor Retained Income Trust (GRIT)?” explains that a grantor retained income trust lets the person who creates the trust transfer assets to it, while still being able to receive net income from trust assets. The grantor keeps this right for a set number of years.

By creating a GRIT, the grantor (or creator of the trust) has the right to receive net income from the assets held in the trust. The trustee distributes income to the grantor, according to the trust terms. After the initial term during which the grantor is eligible to receive income from the trust expires, one of two things can happen. The remaining assets in the trust can be distributed to its beneficiaries. If you don’t want the assets to pass on to beneficiaries immediately, you can set it up so the assets continue to be held in trust.

However, unlike other types of trusts, there are rules on who can get a transfer of GRIT assets. Specifically, there are certain people who can’t be named as a beneficiary to a GRIT, including your spouse, your parents or spouse’s parents, your children or spouse’s children, or your siblings or spouse’s siblings (or their spouses).

However, you can designate the children of your siblings or other distant relatives as the beneficiary to a GRIT.

A GRIT is typically used for one specific purpose, which is to minimize taxes in estate planning. Keeping estate taxes as low as possible results in additional assets to pass on to your beneficiaries when you pass away.

When assets are transferred to a GRIT, they’re valued at a discount. This is based upon on the number of years for which you plan to draw income from the trust as the grantor, and the principal value of assets included in the trust are excluded from your estate for estate and gift tax purposes. However, you’ll be taxed on the income you receive from a GRIT during the initial term. It’s taxed at your ordinary income tax rate. It’s important to know about creating a GRIT for the benefit of minimizing estate taxes, that you must outlive the initial term. If you die during the period when you’re still receiving income from the trust assets, no estate or gift tax benefit would pass on to your beneficiaries.

A grantor retained income trusts can serve a specialized objective as part of your estate plan. However, whether you need one can depend on a variety of factors, so speak with an experienced estate planning attorney about the specifics of a GRIT.

If you would like to learn more about GRITs and other types of trusts, please visit our previous posts. 

Reference: Yahoo Finance (Oct. 23, 2020) “What Is a Grantor Retained Income Trust (GRIT)?”

 

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Federal Estate Tax Exemption is set to Sunset

In 2018, the Tax Cuts and Jobs Act (TCJA) doubled the lifetime gift, estate and generation-skipping tax exemption to $11.18 million from $5.6 million. With adjustments for inflation, that exemption in 2020 is $11.58 million, the highest it’s ever been, reports the article “Federal Estate Tax Exemption Is Set to Expire—Are You Prepared?” from Kiplinger. However, this won’t last forever. There’s a limited time to this historically high exemption. The window for planning may be closing soon. The federal estate tax exemption is set to sunset at the end of 2025, but the impact of a global pandemic and the presidential election will likely accelerate the rollback.

As of this writing, many states have already eliminated their state estate taxes, although 17 states and the District of Columbia still have them. The estate planning environment has changed greatly over the last decade. However, for families with large assets, and for those whose assets may reach Biden’s proposed and far lower estate tax exemption, the time to plan is now.

Gifting Assets Now to Reduce Estate Taxes. The IRS has stated that there will be no claw back on lifetime gifts, so any gifts made under the current exemption will not be subject to estate taxes in the future, even if the exemption is reduced.

Keep in mind that when gifting assets, to make a gift complete for estate tax purposes, you must relinquish ownership, control and use of the assets. If that is a concern, married couples can use the Spousal Lifetime Access Trust or SLAT option: an irrevocable trust created by one spouse for the benefit of the other. Just be mindful when funding irrevocable trusts of gifting any low cost-basis assets. If the trust holds assets that appreciate while in the trust for extended periods of time, beneficiaries could be hit with tax burdens.

Take Advantage of Lower Valuations and Low Interest Rates. The value of many securities and businesses have been impacted by the pandemic, which could make this a good time to consider gifting or transferring assets out of your estate. Lower valuations allow a greater portion of assets to be transferred out of the estate, thereby reducing the size of the estate tax.

With interest rates at historical lows, intra-family loans may be an effective wealth-transfer strategy, letting family members make loans to each other without triggering gift taxes. Intra-family loans use the IRS’ Applicable Federal Rate–now at a record low of between 0.14%-1.12%, depending upon the length of the loan. These loans work best when borrowed funds are invested and the rate of return earned on the invested loan proceeds exceeds the loan interest rate.

Avoid Last-Minute Rush by Starting Now. This type of estate planning takes time. The more time you have to plan with your estate planning attorney, the less likely you are to run into challenges and hurdles that can waste valuable time. When estate tax laws change, estate planning attorneys get busy. Creating a thoughtful plan now may also help prevent mistakes, including triggering the reciprocal trust doctrine or the step transaction doctrine. Planning for asset protection and distribution allows families to control how assets are distributed for many generations and to create a lasting legacy. Take the time to consider your planning before federal estate tax exemption is set to sunset.

If you would like to learn more about exemptions and gifting, please visit our previous posts.

Reference: Kiplinger (Oct. 14, 2020) “Federal Estate Tax Exemption Is Set to Expire—Are You Prepared?”

 

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How Do I Keep Money in the Family?

That seems like an awfully large amount of money. You might think only the super wealthy need to worry about estate planning, but you’d be wrong to think planning is only necessary for the 1%. So how do I keep money in the family?

US News and World Report’s recent article entitled “5 Estate Planning Tips to Keep Your Money in the Family” reminds us that estate taxes may be only part of it. In many cases, there are income tax ramifications.

Your heirs may have to pay federal income taxes on retirement accounts. Some states also have their own estate taxes. You also want to make certain that your assets are transferred to the right people. Speaking with an experienced estate planning attorney is the best way to sort through complex issues surrounding estate planning. When trying to keep money in the family, here are some things you should cover:

Create a Will. This is a basic first step. However, 68% of Americans don’t take it. Many of those who don’t have a will (about a third) say it’s because they don’t have enough assets to make it worthwhile. This is not true. Without a will, your estate is governed by state law and will be divided in probate court. Ask an experienced estate planning attorney to help you draft a will.  You should also review it on a regular basis because laws and family situations can change.

Review Your Beneficiaries. Perhaps the simplest way to keep money in the family. There are specific types of accounts, like retirement funds and life insurance in which the owners designate the beneficiaries, rather than this asset passing via the will. The named beneficiaries will also supersede any directions for the accounts in your will. Like your will, review your account beneficiaries after any major life change.

Consider a Trust. Ask an experienced estate planning attorney about a trust for possible tax benefits and the ability to control when a beneficiary gets their money (after they graduate college or only for a first home, for example). If money is put in an irrevocable trust, the assets no longer belong to you. Instead, they belong to the trust. That money can’t be subject to estate taxes. In addition, a trust isn’t subject to probate, which keeps it private.

Convert to Roth’s. If you have a traditional 401(k) or IRA account, it will help keep money in the family, but it might unintentionally create a hefty tax bill for your heirs. When your children inherit an IRA, they inherit the income tax liability that goes with it. Regular income tax must be paid on distributions from all traditional retirement accounts. In the past, non-spousal heirs, such as children could “stretch” those distributions over their lifetime to reduce the total amount of taxes due. However, now the account must be completely liquidated within 10 years after the death of the owner. If the account balance is substantial, it could necessitate major distributions that may be taxed at a higher rate. To avoid leaving beneficiaries with a large tax bill, you can gradually convert traditional accounts to Roth accounts that have tax-free distributions. The amount converted will be taxable on your income taxes, so the objective is to limit each year’s conversion, so it doesn’t move you into a higher tax bracket.

Make Gifts While You’re Alive. A great way to make certain that your money stays in the family, is to just give it to your heirs while you’re alive. The IRS allows individuals to give up to $15,000 per person per year in gifts. If you’re concerned about your estate being taxable, these gifts can decrease its value, and the money is tax-free for recipients.

Charitable Donations. You can also reduce your estate value, by making charitable donations. Ask an experienced estate planning attorney about setting up a donor-advised fund, instead of making a one-time gift. This would give you an immediate tax deduction for money deposited in the fund and then let you make charitable grants over time. You could designate a child or grandchild as a successor in managing the fund.

Complicated strategies and a constantly changing tax code can make keeping money in the family feel intimidating. However, ignoring estate planning can be a costly mistake for your heirs. Talk to an estate planning attorney. If you would like to learn more about estate tax planning, please visit our previous posts.

Reference:  US News and World Report (Sep. 30, 2020) “5 Estate Planning Tips to Keep Your Money in the Family”

 

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What is a GRAT and Does Your Family Need One?

What is a GRAT and does your family need one? It is a technique where an individual creates an irrevocable trust and transfers assets into the trust to benefit children or other beneficiaries. However, unlike other irrevocable trusts, the grantor retains an annuity interest for a number of years.

As a result of the low interest rate environment, some families may have a federal estate tax problem and need planning to reduce their tax liability. A Grantor Retained Annuity Trust, known as a GRAT, is one type of planning strategy, as described in the article “Estate planning with grantor retained annuity trust” from This Week Community News.

Here’s an example. Let’s say a person owns a stock of a closely held business worth $800,000. Their estate planning attorney creates a ten-year GRAT for them. The person transfers preferably non-voting stock in the closely held business to the GRAT, in exchange for the GRAT paying the person an annuity amount to the individual who established the GRAT for ten years.

The annuity amount payment means the GRAT pays the individual a set percentage of the amount of the initial assets contributed to the GRAT over the course of the ten-year period.

Let’s say the percentage is a straight ten percent payout every year. The amount paid to the individual would be $80,000. At the end of the five-year period, the grantor would have already received an amount back equal to the entire amount of the initial transfer of assets to the GRAT, plus interest.

At the end of the ten-year term, the asset in the trust transfers to the individual’s beneficiaries. If the GRAT has grown greater than 1%, then the beneficiaries also receive the growth. The GRAT makes the annuity payment with the distribution of earnings received from the closely held business, which is likely to be an S-Corp or a limited liability company taxed as a partnership. Assuming the distribution received is greater than the annuity payment, the GRAT uses cash assets to make the annuity payment. For the planning to work, the business must make enough distributions to the GRAT for it to make the annuity payment, or the GRAT has to return stock to the individual who established the GRAT.

There are pitfalls. If the individual dies before the term of the GRAT ends, the entire value of the assets is includable in the estate’s assets and the technique will not have achieved any tax benefits.

If the plan works, however, the stock and all of the growth of the stock will have been successfully removed out of the individual’s estate and the family could save as much as 40% of the value of the stock, or $320,000, using the example above.

It is possible to structure the entire transaction, so there is no gift tax consequence to the grantor. If the person is concerned about estate taxes or the possible change in the federal estate tax exemption, which is due to sunset in 2026, then a GRAT could be an excellent part of your family’s plan. When the current estate tax exemption ends, it may return from $11.58 million to $5 or $6 million. It could even be lower than that, depending on political and financial circumstances. Planning now for changes in the future is something to consider and discuss with your estate planning attorney.

If you like to learn more about various types of trusts, and how they work, please visit our previous posts.

Reference: This Week Community News (Sep. 6, 2020) “Estate planning with grantor retained annuity trust”

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Make the Most of Exemptions in Gifting

The time period available to take advantage of the high transfer tax exemption has driven many to make or give more serious thought to making large gifts, while exemptions are certain. However, not everyone is ready or able to give away large amounts of wealth, in case they may be needed in the future. For those who are concerned about needing these assets, there are some strategies that can allow you to make the most of exemptions in gifting, reports the article “Five Ways to Build Flexibility Into Your Gift Planning” from Financial Advisor Magazine.

Spousal Lifetime Access Trust, or SLAT, is one option for married couplies. This is a type of irrevocable trust that includes the grantor’s spouse as one of the beneficiaries. The couple can enjoy the gift tax exemption, because the trust is funded while one spouse is living, but they can also have access to the trust’s assets because the grantor’s spouse may receive both income and principal distributions. A few things to keep in mind when discussing this with your estate planning attorney:

  • If both spouses want to create a SLAT, be careful not to make the trusts identical to one another. If they are created at the same time, funded with the same amount of assets and contain the same terms, it is possible they will not withstand scrutiny.
  • The term “spouse” has some flexibility. The spouse could be the current spouse, the current spouse and a future spouse, or a future spouse for someone who is not yet married.

Special Power of Appointment is a power granted to a person to direct trust assets to a specified person or class of people (other than the power holder, the estate of the power holder or the creditors of either one). The power holder may direct distributions to one or more people, change the beneficiaries of the trust and/or change the terms of the trust, as long as the changes are consistent with the power of appointment. Note the following:

  • The permissible appointees of a power of appointment can be broad or narrow, and the grantor may even be a permissible appointee for outright distributions.
  • If the grantor is a permissible appointee, special care must be taken when naming the power holder(s) to avoid any challenge that the trust was always intended for the grantor. The trust may need to have multiple power holders, or a third party, to agree to any distributions.

A Trust Protector is a person who has powers over the trust but is not a trustee. This is an increasingly popular option, as the trust protector has the ability to address issues and solve problems that were not anticipated when the trust was created. The Trust Protector may often remove or replace trustees, make changes to beneficiaries, divide the trust, change administrative provisions, or change trust situs.

A Disclaimer is used when a gift recipient renounces part or all of a gift transferred to them. When a gift is made to a trust, the trust instrument is used to specify how the assets are to pass, in the event of a disclaimer. If the grantor makes a gift to the trust but is then concerned that the gift is unnecessary or the grantor might need the assets back, the trust can provide that the assets revert to the grantor in the event of the disclaimer.

Planning with Promissory Notes is another way to include flexibility in the timing, implementation and amount of gift planning. An asset is sold by the grantor to a grantor trust in exchange for a promissory note. There are no income tax consequences, as the sale is to a grantor trust. If the sale is for full market value, there is no gift. The grantor gets to decide when, and if, to make a gift with the promissory note.

Speak with your estate planning attorney to determine which, if any, of these strategies is the right fit for you and your family. While it is impossible to know exactly when and how the federal exemptions will change, there are many different tools that can be used while waiting for any changes.

If you would like to learn more about gifting, please visit our previous posts.

Reference: Financial Advisor Magazine (Sep. 10, 2020) “Five Ways to Build Flexibility Into Your Gift Planning”

 

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Gifting Can Help Heirs Reach Goals

Gifting can help heirs reach their goals. The applicable exclusion amount for gift/estate tax purposes is $11.58 million in 2020, a level that makes incorporating gifting into estate plans very attractive for high net-worth families. If a donor’s taxable gift—one that does not qualify for the annual, medical or education exclusion—is in excess of this amount, or if the value of the donor’s aggregate taxable gifts is higher than this amount, the federal gift tax will be due by April 15 of the following year. The current gift tax rate is 40%.

This presents an opportunity, as described in detail in the article “The Case for Gifting Now (or At Least Planning for the Possibility” from The National Law Review.

If the exclusion is used during one’s lifetime, it reduces the amount of the exemption available at death to shelter property from the estate tax. With proper planning, spouses may currently gift or die with assets totally as much as $23.16 million, with no gift or federal estate tax.

To gain perspective on how high this exclusion is, in 2000-2001, the applicable exclusion amount was $675,000.

The exclusion amount will automatically decrease to approximately $6.5 million on January 1, 2026, unless changes are made by Congress before that time to continue the current exclusion amount. Now is a good time to have a conversation with your estate planning attorney about making gifts in advance of the scheduled decrease and/or any changes that may occur in the future. The following are reasons why this exemption may be lowered:

  • Trillions of dollars in federal stimulus spending necessitated by the COVID-19 pandemic and the severe economic downturn in the U.S.
  • Past precedent of passing tax legislation mid-year and applying it retroactively to January 1.
  • A possible change in party control for the presidency and/or the Senate
  • The use of the budget reconciliation process to pass changes to taxes.

In the 100-plus year history of the estate tax, the exemption has never gone down. However, the exemption has also never been this high. The possibility of a compressed time frame for family business owners and wealthy individuals to implement lifetime gifts before any legislative change may make a tidal wave of gifting transactions challenging between now and December 31, 2020. Now is the time to start gift planning and take action to utilize the exclusion amount and help your heirs reach their goals.

If you would like to learn more about ways to reduce your estate taxes, please view our previous posts.

Reference: The National Review (Aug. 20, 2020) “The Case for Gifting Now (or At Least Planning for the Possibility”

 

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What Is a Qualified Personal Residence Trust?

What is a Qualified Personal Residence Trust? It takes your personal residence out of your estate, and has some advantages, especially when it comes to taxes. The QPRT is a type of irrevocable trust, so once it is created, it is permanent and cannot be reversed. The QPRT is also a type of grantor trust, meaning that the trust creator or grantor may take advantage of gift tax exemptions for property placed in the trust, explains the article “Qualified Personal Residence Trust (QPRT)” from yahoo! finance.com.

As a grantor, you can live in the home for a period of time, with a retained interest in the property. Once the QPRT term ends, ownership of the property gets transferred to the beneficiaries of the trust.

When you establish a QPRT, you take your personal residence, a primary or secondary home, out of your estate and place it in the trust. While the trust is in place, you and your family may live in the home, and you continue to be responsible for maintaining the property’s upkeep. You also still have to pay property taxes.

Any appreciation that occurs after the transfer takes place is also removed from your estate. Because you retain an interest in the residence, you can reduce the amount of property’s value that is subject to estate and gift taxes from your estate.

However, there is one rule you need to know before setting up the QPRT—you must outlive the term of the trust. If you don’t, the entire value of the residence may be included in your estate, which destroys the key reason for setting up the trust.

This is a complex tool for estate planning, and it isn’t for everyone. A QPRT can be good for creating a financial legacy for beneficiaries, helps your estate avoid taxes after your death and if you are paying rent to trust beneficiaries, creates another path to minimize estate taxes.

On the other hand, a QPRT is irrevocable. Therefore, if your circumstances change, it may not be useful for you but you won’t be able to undo it. If you die before the end of the term, any benefits for gift or estate taxes are lost. If there is a mortgage on the property, mortgage payments might be counted against gift tax exemptions.

Attempting to refinance a home that’s owned by a QPRT is difficult, and in many circumstances, not even possible. You don’t own the home, the trust does. Therefore, the property cannot be used as collateral. Selling a home that is owned by a QPRT is also far more complicated than selling the property if you owned it outright.

An estate planning attorney will analyze your estate and tax situation to determine if a QPRT is a useful tool for you and your family. To learn more about QPRTs and other types of trusts, please read our previous posts.

Reference: yahoo! finance.com (July 29, 2020) “Qualified Personal Residence Trust (QPRT)”