Creative Uses of QPRTs

Gallo, Jon J.
February 2002
Journal of Financial Planning;Feb2002, Vol. 15 Issue 2, p28
Academic Journal
This article focuses on the qualified personal residence trust (QPRT) and suggests some creative uses that should be kept in mind by the sophisticated estate planner. A QPRT is essentially nothing more than a pre-Chapter 14 GRIT funded exclusively with an interest in the grantor's personal residence or vacation home. The grantor retains the exclusive use of the residence for a term of years specified in the trust instrument. The grantor may select any term of years; there is no minimum or maximum term required by the Internal Revenue Code (IRC). The retained "rental value" of the residence or vacation home is determined using the IRC Section 7520 rate in effect for the month in which the transfer to the trust occurs. The trust also may provide for a contingent reversionary interest that causes the residence to revert to the grantor's estate if the grantor dies before expiration of the term of the trust. An alternative to the traditional QPRT is a transaction structured as a part gift, part sale, to an intentionally defective grantor trust.


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