Definition
A trust into which a homeowner transfers a personal residence at a reduced gift-tax value, retaining the right to live there for a fixed number of years.
A Qualified Personal Residence Trust (QPRT) lets a homeowner move a home out of their taxable estate while continuing to occupy it for a set term — say, ten years. Because the future gift to heirs is delayed, its value for gift-tax purposes is discounted using IRS actuarial tables. The longer the retained term, the steeper the discount, though the grantor must outlive the term for the strategy to succeed; dying during the term returns the home to the estate as if the trust never existed.
Families with a high-value primary residence or vacation property sometimes evaluate QPRTs when they expect the property to appreciate significantly. Illustratively, a home worth roughly $5 million today transferred via a QPRT might be valued at a meaningfully lower figure for gift-tax purposes, allowing heirs to inherit a property potentially worth far more while using comparatively little of the grantor's lifetime gift-tax exemption. The amount of any exemption is set by law and changes; current figures should be verified with a qualified professional.
A common confusion: once the retained term ends, the grantor must pay fair-market rent to the trust (now owned by heirs) to continue living in the home. Failing to pay rent is not merely awkward — it can create gift-tax and estate-tax complications. A qualified attorney and CPA must evaluate whether a QPRT suits a particular family's circumstances, property profile, and health outlook.
Last reviewed August 25, 2026 · Editorial Policy
