Saving The Family Home: Use A House Trust?

Many of my clients want to be certain that their homes go to their children when they die.  As many homes appreciate in value clients also worry about their children having to pay estate taxes on the increased value of the house.  One option of leaving the home to children  is to use a Qualified Personal Residence Trust also known as a QPRT.

Please consult your attorney before considering any estate planning option because there are many pros and cons to each option. Here are some pros and cons for QPRT's:

Pros:

1.  It removes any appreciated value of a house from a parent's estate which can help reduce estate tax liability.

2.  The parents can continue to live in the house during the term of the trust.

3.  Both residence and vacation homes can qualify.

4.  Often more than one home can be protected.

5.  When the trust term ends the children receive the home.

Cons:

1.  Capital gains tax can be a significant factor on the sale of the home because the cost basis of the house remains the same as it was for the parents.

2.  If the parents die before the trust terminates the home will not be devalued for estate tax purposes.  Thus it is very important the parents survive for the term of the trust.

3.  Children will become their parents landlord when the trust terminates.  As such children could evict their parents  or increase the rent to live in the home.

4.  These trusts are very complicated. In order to set one up you will need a lawyer.

 

Comments

[peter Tracy]

If one has a QPRIT several years old can it be unraveled (cancelled)?
Thanks,
peter tracy

[Umendra Singh]

Home is your comfort zone.A home is a place of residence or refuge.Home is anywhere were you can be you and you can feel comfortable .A family consists of the people you've known for a long time, who are always there for you. Family is blood related that you would kill, or die for.

[Jones Act]

i would hope my son wouldn't evict me! Thanks for the post. good stuff to know.