Steps to take after Qualified Personal Residence Trust has terminated

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In a qualified personal residence trust (QPRT), you (the grantor) transfer your primary residence to the trust for a term of years and continue to live in the residence. If you die during the term, the primary residence reverts to you. If you outlive the term of the QPRT, the residence passes to your remainder beneficiaries. At that time, several things need to happen.

Below is a quick checklist:

  • Transfer title of residence — the trustee of the QPRT must transfer ownership of the residence from the name of the trust into the names of the remainder beneficiaries. This is done by recording a new deed in the registry where the property is located.
  • Pay fair market rent — if you want to continue to live in the residence full-time, or if you want to use it periodically, such as for vacations, you’ll have to pay fair market rent to the remainder beneficiaries. This will help to further reduce the value of your estate, federal gift tax free, or keep you from having to use any more of your $5,340,000 (in 2014) gift and estate tax basic exclusion amount, because the rent payments won’t be considered gifts. Note: it’s important to execute a written lease.
  • Shift payment of expenses for the property to the remainder beneficiaries — During the term of the trust, the grantor typically continues to pay the expenses for upkeep of the home, such as maintenance, taxes, and repairs. When the QPRT terminates and ownership shifts to the remainder beneficiaries, so does the obligation to pay those expenses. Note: the income tax deduction for real estate taxes shifts as well.
  • Do not repurchase the residence — an IRS ruling prohibits the grantor, the grantor’s spouse, and any entity benefitting the grantor or the grantor’s spouse from repurchasing the residence either during the trust term or afterward.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.

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