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My qualified personal residence trust has terminated. What do I do now?

In a qualified personal residence trust (QPRT), you (the grantor) transfer your primary residence to the trust for a term of years and continue to live in the residence. If you die during the term, the primary residence reverts to you. If you outlive the term of the QPRT, the residence passes to your remainder beneficiaries. At that time, several things need to happen. Here's a quick checklist.

  • Transfer title of residence: The trustee of the QPRT must transfer ownership of the residence from the name of the trust into the names of the remainder beneficiaries. This is done by recording a new deed in the registry where the property is located.
  • Pay fair market rent: If you want to continue to live in the residence full-time, or if you want to use it periodically, such as for vacations, you'll have to pay fair market rent to the remainder beneficiaries. This will help to further reduce the value of your estate federal gift tax free, or keep you from having to use any more of your $5,340,000 (in 2014) gift and estate tax basic exclusion amount, because the rent payments won't be considered gifts. Note that it's important to execute a written lease.
  • Shift payment of expenses for the property to the remainder beneficiaries: During the term of the trust, the grantor typically continues to pay the expenses for upkeep of the home, such as maintenance, taxes, and repairs. When the QPRT terminates and ownership shifts to the remainder beneficiaries, so does the obligation to pay those expenses. Note that the income tax deduction for real estate taxes shifts as well.
  • Do not repurchase the residence: An IRS ruling prohibits the grantor, the grantor's spouse, and any entity benefitting the grantor or the grantor's spouse from repurchasing the residence either during the trust term or afterward.

It's important to get professional legal advice before taking any action.

IMPORTANT DISCLOSURES Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020.