Passing on Real Property
There is no simple way to bequeath land, homes and other real property without extensive tax penalties. Two of the most important instruments for real property transfer are the qualified personal residence trust (QPRT) and the home security trust. Each of these options should be considered carefully, with the help of an experienced legal team, as potential options of any comprehensive estate planning strategy.
The attorneys of Cushing & Dolan, P.C., bring a wealth of experience and wisdom regarding the distribution of real property. We are familiar with the benefits, pitfalls, and the complex workings of QPRTs and home security trusts. From our six Massachusetts office locations (Boston, Waltham, Westborough, Norwood, Chestnut Hill and Woburn), we serve individuals, families and businesses throughout Massachusetts, New Hampshire, Florida, Pennsylvania, Arizona, and New York. Since 1984, our lawyers have been helping our clients realize their estate planning goals with minimum tax consequences and maximum efficiency.
Qualified Personal Residence Trusts
In a QPRT, the donor's gift is completed at the time the trust is completed, thus freezing the gift value at the time of the trust's inception. By retaining an interest, the value of the gift is reduced, thus reducing the gift tax consequences. The donor then lives in the home until death. However, this method is ineffective for allocation of generation-skipping transfer tax exemption, and generally the QPRT should only be employed when there is no mortgage, since the payment of mortgage represents an addition to the trust. The property will be included in the donor's estate if the donor dies during the term of the trust.
Home Security Trusts
Many people prefer the home security trust to the QPRT. This method involves a sale to an intentionally defective grantor trust, combined with rental of the home. The home security trust can provide tremendous generation-skipping, gifting and estate tax benefits for the distribution of real property. The grantor in a home security trust remains in the home until death, paying fair market value rent.
Free Consultations ∙ Experienced Boston Area Estate Planning Lawyers
For anyone but experienced estate planning professionals, the benefits and pitfalls associated with QPRTs and home security trusts can present tremendous difficulty and complication. Talk with one of our experienced Boston estate planning lawyers to discuss which option will work best for your estate planning goals. We can help you maximize your gifting strategies. Call 617-523-1555 or contact us online for a free consultation with a lawyer from Cushing & Dolan, P.C.
