A qualfied personal residence trust is an advanced estate planning technique that can reduce your state and federal estate taxes by removing the value of your home from your estate.
A qualified personal residence trust is an irrevocable trust that is set up to own your home for a period of time, usually ten to fifteen years. After the time specified passes, the home is transferred out of the trust and to the benficiaries of the trust - usually your children. You continue to live in your home while it is owned by the trust. Once your home is transferred out of your trust to the beneficiaries, you can continue to live in your home but must now pay fair market value rent to the owners of the home - again, usually your children.
By utilizing this advanced estate planning technique, you remove the value of your home from your estate for estate tax purposes. If the value of your home is $1 million, you have effectively removed $1 million from your taxable estate.
To learn more about qualified personal residence trusts, click here.