Real Estate Law
For many people, their primary residence is one of their biggest lifetime investments. It might constitute a large part of their estate and a large part of the inheritance that they intend to pass to their children and heirs. Accordingly, many people have two concerns when it comes to their primary residence. They are concerned both with protecting their home for their heirs and with minimizing the tax implications on their residence.
A qualified personal residence trust is a way of being able to achieve these goals. However, qualified personal residence trusts are irrevocable and cannot be changed without the consent of the beneficiaries. Estate planning laws are different in every state. If you have questions about whether a qualified personal residence trust is right for you, talk to a local estate planning lawyer about your situation.
Qualified Personal Residence Trusts offer many benefits to both the current owners of the home and the heirs who will inherit the home. It also provides asset protection if a homeowner decides to establish a qualified personal residence trust then they will put the home into a trust for the benefit of whomever they want to inherit the property.
During the term of the trust, the owner will be able to live in the house rent-free, as long as they continue to pay all the expenses of the home, including the real estate taxes. Thus, the homeowner retains the right to live in their home, and the people who will inherit the home are not burdened with taxes or other expenses at a time when they are not using the home.
Since a home is such a large asset, it is important to work with a trusted estate planning attorney when developing your qualified personal residence trust. Each trust should:
Since the home is in a trust, the creator of the trust will not need to pay estate taxes on the property. However, the creator of the trust will need to pay gift tax on the trust assets if the amount of the gift exceeds the amount exempt from gift tax. The value of the home that is subject to gift tax may be considerably less than the fair market value of the home because of the interest that the creator of the trust is maintaining in the home.
It is important to note that if the creator of the trust dies while they are still living in the house rent-free and before the home passes to the heirs, then the value of the home may be included in the estate. A qualified personal residence trust provides some very real benefits for families. However, in order to recognize these benefits, it is important to consult with an estate planning attorney when preparing your trust documents to make sure they comply with all applicable laws.
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified real estate lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local real estate attorney to discuss your specific legal situation.