Senior Couple At Home

This type of trust allows a person to still live in a home for the term of the trust, deduct mortgage interest and real estate taxes, and then when the term of the trust expires, the home passes to the heirs and out of the owner’s estate. The owners can retain the right to live in the home for the rest of their lives by paying fair market rent to the heirs.

There are several tools in the “trust toolbox” of estate planning. Each one does a certain job, so it’s a matter of finding the right one for your needs. And in the present low interest environment, there are especially good trust tools for estate tax planning.

This was the subject of a recent Fox Business article titled Shielding Your Assets From Estate Taxes.”

The two trusts that seem to benefit the most from a low interest environment are GRATs, Grantor Retained Annuity Trusts, and QPRTs, Qualified Personal Residence Trusts. Since I recently reviewed the subject of GRATs, here is the difference between the two – QPRTs can leverage the transfer of your home.

The problem with planning for the family homestead is a very practical one. Likely, you are living there and would like to continue doing so for as long as you can. On the other hand, you do not want to subject your home to probate or estate taxation.

Properly structured, a QPRT can allow you to live in the home while simultaneously giving it away by holding it in the trust. While there are more than a few tax advantages to this, this ability to preserve the home and transfer it is always key.

All that noted, the favorable interest rates and political winds may be about to shift on QPRTs and GRATs. Consequently, do not procrastinate or the window of opportunity may close.

Reference: Fox Business (July 29, 2013) Shielding Your Assets From Estate Taxes

For more information on asset preservation and estate tax planning, please visit my estate planning website.

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.