Many West Palm Beach Probabe attorneys and estate planners describe Qualified Personal Residence Trusts (QPRTs) as a “must have” estate planning opportunity in Florida.
Essentially, a Florida QPRT is an irrevocable trust funded by the transfer of a personal residence to the trustee while retaining in the transferor a right to reside on the property for a term of years.
- If you have a principle residence or vacation home, an excellent opportunity to substantially reduce potential estate tax liability is through the use of an estate planning tool like a QPRT in Florida.
- Through the use of a QPRT, the IRS permits a homeowner to make a tremendously discounted gift of their residence to their children, while still retaining the long-term use of the property.
- Quite often, a residence or vacation home constitutes a significant portion of an estate.
- At the time of death, the value of the property is included in estate just like any other asset.
As of January 1, 2002, an individual may leave a maximum of $1,000,000.00 to his or her children before an estate tax is imposed.
- This figure is known as the applicable exclusion amount.
- Your goal should be to utilize the exclusion amount as efficiently as possible or yourFlorida estate may ultimately be subject to a tax rate of up to 50% in Florida.
- The Florida QPRT provides an excellent opportunity to gift a principle residence or vacation home to children while retaining the full right to use the home for a specified number of years.
- When the trust term selected by you expires, the home passes on to your children or other named beneficiaries.
- The tax is reduced substantially as only the value of your future gift to children is computed fortax purposes in Florida.
There is one significant drawback, however, with Florida QPRTs.
- The donor must survive the full length of the term.
- If the donor passes away during this term, the home is transferred back into the donor’s estate (Sunny Isles), and the value of the home is subsequently reported at its true value.
Have you had any experience with Qualified Personal Residence Trusts in Florida? If so, leave a comment down below.