Using a qualified personal residence trust

With a qualified personal residence trust, a Georgia resident can transfer their home to a trust and reserve the right to live on the property for a certain number of years. Conducting a home transfer with this type of trust reduces the amount of gift tax an individual would owe and eliminate the value of the home from one's estate.

According to current law, the cost basis for purposes of figuring out gain on a sale is increased to the date-of-death value. The heirs who receive the home are forced to report a reduced taxable gain when they sell the property.

A QPRT transfers ownership of property using a carryover basis instead of the step-up basis. This makes it an ideal estate planning vehicle for beneficiaries who would like for the property to remain in the family for generations. Maintaining proper records for basis is important as they will be required for calculating depreciation if the property is leased or if capital gains have to be determined after the sale of the property.

When planning for generation-skipping transfer taxes, estate planners typically do not use a QPRTS because the exemption for the GST tax does not become effective until after the initial QPRT term. Also, the property would have to be valued at its fair market value on the end date of the QPRT.

An attorney who practices estate planning law may advise clients of the appropriate estate planning tools to use to accomplish specific financial goals. The lawyer may consider the type of assets a client has and how the client wants the assets to be distributed to beneficiaries. The attorney may recommend tools to use to reduce estate taxes and avoid the probate process.

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