Do you own your principal residence? If so, you’re likely aware that you can benefit from the home’s build-up in equity, realize current tax breaks and pocket a sizable tax-exempt gain when you sell it.
And from an estate planning perspective, it may be beneficial to transfer ownership of your home to a qualified personal residence trust (QPRT). Using a QPRT, you can continue to live in the home for the duration of the trust’s term. When the term ends, the remainder interest passes to designated beneficiaries.
A QPRT in action
When you transfer a home to a QPRT, it’s removed from your taxable estate. The transfer of the remainder interest is subject to gift tax, but tax resulting from this future gift is generally reasonable. The IRS uses the Section 7520 rate, which is updated monthly, to calculate the tax. For September 2024, the rate is 4.8%, down from the year’s high thus far of 5.6% in June.