Often Requested Questions About Qualifying Personal Housing Trusts – New York Property Planning Lawyer Weblog – Dec 4, 2020

For many people who are dying, their home is their most valuable asset. As a result, various estate planning strategies are used to hide such an asset. One of the most commonly used estate planning tools for asset transfer is a qualified personal residence trust. Such trusts allow the originator to avoid potentially significant tax complications without facing significant life challenges. When the trust terms expire, the rest will be passed on to the designated beneficiaries. Because individuals interested in qualified personal residence trusts often have several questions about this estate planning strategy, this article addresses some nuanced questions about how these trusts work.

What if you survive the terms of the trust?

It’s easy to feel uncomfortable when there is a chance that you will still be alive when the terms of trust end. In such a situation, the remaining beneficiaries inherit your property. This may mean that you will have to pay the beneficiary’s rent in order to continue living at your home. While this may seem a significant challenge at first, you should be aware that these types of interventions often help achieve the estate planning goal of transferring assets to loved ones.

What are the effects of such trust?

In order to establish such trust, a person must appoint a trustee to administer it. In many cases, a grantor acts as a trustee. These trusts also result in someone’s home being removed from that person’s taxable estate. Currently both Estate and gift tax is $ 11.58 million. However, that amount is expected to be reduced to $ 5 million in 2026. The rest of the trust is also subject to gift tax, but taxes of this type are often low.

If you choose to set up a qualified personal trust and then die before the trust ends, your home will be included in your taxable estate. Aside from the cost of creating and maintaining a qualified personal residence trust, your loved ones will be no worse off than they were when you established the trust.

The shortcomings of withdrawing from a business

The main disadvantage of qualified personal residence trusts is that they are irrevocable and impossible to get out of the trust. However, that fear resolves when people realize that the trust’s most likely negative outcome is that he or she pays rent to the beneficiaries if they survive a trust’s life or, in some cases, the house is returned to the estate. Another disadvantage to creating such a trust is that there is almost a cost associated with establishing such a trust, including legal fees and title costs. In addition, it is not possible to take out a mortgage on a home after it has been transferred to a qualified personal residence trust.

Despite these shortcomings, it is important to recognize that such trust can be part of a comprehensive estate plan. However, to make sure that trust plays a valuable role in your estate plan, it’s a good idea to speak with an experienced estate planning attorney.

Talk to an experienced estate planning attorney

Qualified personal residence trusts are one of the most sophisticated estate planning tools that can help make the most of an individual’s estate. If you have any questions or concerns about the estate planning process, it is best to speak to a knowledgeable estate planning attorney. Contact Law firm Ettinger today to schedule a free case assessment.