QPRTs: Transfer Your Home to Heirs at a Discount
A qualified personal residence trust freezes your home's value for gift-tax purposes and removes future appreciation from your estate.
The idea behind a QPRT
A qualified personal residence trust (QPRT) lets you transfer your home (or a vacation property) to your heirs at a discounted gift-tax value, while keeping the right to live in it rent-free for a set number of years. The QPRT Calculator estimates that discount and the estate tax it can remove.
It is one of the few techniques that turns a personal residence — usually a hard asset to plan around — into an efficient wealth-transfer vehicle.
Why the gift is discounted
When you put the home in a QPRT, you keep the right to use it for the trust term. Because your heirs only receive the home after that term ends, the IRS values their future interest at a discount — the present value of receiving the home years from now. The longer the term and the higher the §7520 rate, the bigger the discount.
So a $2 million home might generate a taxable gift of only $1.2 million, using far less of your exemption than an outright transfer would. And critically, all appreciation during the term escapes your estate.
Freezing appreciation
The real power is the estate freeze. Once the home is in the QPRT, its future growth happens outside your taxable estate. If the property appreciates substantially over the term, the estate tax avoided can dwarf the modest exemption you used up front.
This makes QPRTs especially attractive for homes in appreciating markets or properties a family intends to keep for generations.
The survival requirement and life after the term
As with a GRAT, you must outlive the trust term. Die during it, and the home is pulled back into your estate as if the QPRT never happened. So the term is set to balance a bigger discount (longer term) against the survival risk.
When the term ends, you no longer own the home — your heirs do. If you want to keep living there, you must pay them fair-market rent, which is itself a useful way to move more money out of your estate tax-free.
Is it right for you?
QPRTs fit people with valuable residences, a taxable estate, reasonable life expectancy over the chosen term, and a willingness to give up ownership of the home. They do not work well for property you might sell during the term, and they forfeit the step-up in basis the home would get at death.
Because the drafting, valuation, and post-term rent arrangements are technical, a QPRT should be built with an experienced estate attorney. Legal-document services can point you toward qualified counsel.
Read the full guide