Qualified Personal Residence Trust (QPRT)
A QPRT is an irrevocable trust that transfers a personal residence to beneficiaries at a discounted gift tax value by retaining the right to live in the home for a specified term of years.
Exam Tip
QPRT = residence only (max 2). Higher 7520 rate = better. Grantor MUST survive. Post-term: pay fair rent. Carryover basis, NOT stepped-up.
What is a QPRT?
A QPRT allows homeowners to transfer their residence at a significantly reduced gift tax cost. The grantor retains the right to live in the home for a specified period, then ownership passes to beneficiaries.
How a QPRT Works
| Stage | What Happens |
|---|---|
| Creation | Transfer residence into trust |
| Retained Interest | Grantor lives in home for term |
| Term Ends | Home passes to beneficiaries |
| Post-Term | Must pay fair rent to stay |
Key Differences from GRAT
- QPRT = residence only (max 2 per person)
- Higher Section 7520 rate = BETTER for QPRT
- Lower Section 7520 rate = BETTER for GRAT
Risks
- Must survive term
- Beneficiaries receive carryover basis (not stepped-up)
Study This Term In
Related Terms
Irrevocable Trust
An irrevocable trust is a legal arrangement where the grantor permanently transfers assets out of their estate into a trust that generally cannot be modified, amended, or terminated, providing potential estate tax benefits and asset protection.
Grantor Retained Annuity Trust (GRAT)
A GRAT is an irrevocable trust where the grantor transfers assets and retains the right to receive fixed annuity payments for a specified term, with any appreciation above the IRS Section 7520 hurdle rate passing to beneficiaries gift-tax-free.
Unified Credit (Estate Tax Exemption)
The unified credit is a federal tax credit that exempts a specified amount of assets from estate and gift taxes during a person's lifetime and at death, set at $13.99 million for 2025 and $15 million for 2026 per individual.
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