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Based On Experienced Advice


Among those with wealth primarily concentrated in their home or investment portfolio, there are two types of trusts designed to transfer wealth to heirs and save taxes by removing the assets from the estate. In effect, this reduces the amount of the decedent’s taxable wealth. One is a grantor retained annuity trust, or GRAT, typically used to shelter future appreciation of stocks. The other is a qualified personal residence trust, or QPRT, that will shelter current and future appreciation on the value of your home.

For every job, there is a tool to get the job done right. The same holds true for trusts. Thankfully, in the present low interest environment, there are especially good estate tax planning tools available.

This was the subject of a recent Fox Business article titled “Shielding Your Assets From Estate Taxes.

The two trusts that seem to benefit the most from a low interest environment are GRATs, Grantor Retained Annuity Trusts, and QPRTs, Qualified Personal Residence Trusts. Since I recently reviewed the subject of GRATs, here is the difference between the two – QPRTs can leverage the transfer of your home.

The problem with planning for the family homestead is a very practical one. Likely, you are living there and would like to continue doing so for as long as you can. On the other hand, you do not want to subject your home to probate or estate taxation.

Properly structured, a QPRT can allow you to live in the home while simultaneously giving it away by holding it in the trust. While there are more than a few tax advantages to this, this ability to preserve the home and transfer it is always key.

All that noted, the favorable interest rates and political winds may be about to shift on QPRTs and GRATs. Consequently, do not procrastinate or the window of opportunity may close.