Parents can give their homes to their children at a substantial tax savings by way of a trust know as a “qualified personal resident trust” (QPRT). In creating a QPRT, parents put their home or vacation home in a trust to give it as a delayed gift (usually to their children) while retaining the right to live in the home for a number of years. QPRTs are seen as ideal for keeping a home in a family for generations.
Essentially, the way a QPRT works is that the value of the home is discounted to an amount reflecting the delay in time before someone else can live in the home. The tax is applied to the discounted value. Further, if the house appreciates in value over that time, all that appreciation will go to the children tax-free. [Read more…]