You may be afraid of losing your home if you have to enter a nursing home and apply for Medicaid. While this fear is well-fou...Read more
Is Now a Good Time to Give Your House to Your Children?
- November 25th, 2008
While falling real estate values aren't good news, if you have a taxable estate it could be an opportunity to give your house to your children while still living in it. You may save on gift and estate taxes by moving your home into a qualified personal residence trust (QPRT).
A QPRT works by allowing homeowners to put their house in a trust for a period of years (usually 10 years). The homeowner will have to pay a gift tax on the transfer, but due to a complicated formula that takes current interest rates into account, the gift tax is reduced. During those 10 years, the homeowner still lives in the house and pays all expenses, including property taxes. After 10 years, the home transfers to the beneficiaries of the trust. The beneficiaries will own the home and it won't be subject to estate tax. However, if the original homeowners wish to remain in the house after the trust ends, they will have to pay rent.
According an article in the Wall Street Journal, if you are interested in a QPRT, now may be a good time to set one up because lower real estate values means you will lock in a lower gift tax rate and the house will accumulate value outside of your estate.
There are many things to consider before setting up a QPRT. A QPRT only makes sense if you think your house will bring your estate above the estate tax exemption, which in 2009 will be $3.5 million for single individuals and $7 million for couples with proper planning. (The estate tax is scheduled to be eliminated for the year 2010 and then in 2011 the estate taxation rules will revert to those prevailing in 2002, when the exemption was $1 million, although Congress is likely to change the law before this happens.)
Another consideration is that if you die before the 10-year period ends, the house will revert to your estate. In addition, the trust is irrevocable, so you can't change your mind after it is created. Also, some estate planners don't recommend a QPRT when interest rates are low.
To find out if a QPRT is right for you, contact an estate planning attorney. Click here to find one near you.
For the article from the Wall Street Journal, click here.
Local Elder Law Attorneys in Ashburn, VA
The Estate Planning & Elder Law Firm PC
Bill founded The Estate Planning & Elder Law Firm, P.C. in 1994. Bill limits his practice to the areas of estate planning and administration, incapacity planning, Medicaid, asset protection planning, and elder law. He is one of (15) fifteen attorneys practicing in Virginia, Maryland and the District of Columbia, ce...
Hale Ball Carlson Baumgartner Murphy PLC
Loretta Morris Williams is a certified elder law attorney by the National Elder Law Foundation. Ms. Williams was admitted to the Council of Advanced Practitioners, National Academy of Elder Law Attorneys (NAELA) in 2012. She serves as President of the Virginia Academy of Elder Law Attorneys. Ms. Willia...
Needham Mitnick & Pollack, PLC
Judith Mtinick is well known for acting as a guardian, conservator, trustee or agent on behalf of clients or by court appointment. This experience gives her a wide perspective and extensive practical knowledge that she uses when advising clients in drafting their planning documents. Her experience, as a court appointed...