Qualified Personal Residence Trust - QPRT QA
Questions and Answers

Question 1: What is a personal residence?

Answer: A residence is your personal residence only if its primary use is as your residence. A second residence that is rented for residential purposes for part of the year may be a personal residence.

Question 2: I live on my boat, which has all the comforts of home (and then some), for most of the year; may I put the boat into a QPRT?

Answer: Yes. As long as you use the use the vessel as a residence for greater than 14 days a year or greater than 10% of the time that you rent it out, it will qualify as a personal residence that you may transfer to a QPRT. The same applies to recreational vehicles.

Question 3: May I transfer household furnishings, artwork and personal items to the trust?

Answer: No. A personal residence may include appurtenant structures used for residential purposes and adjacent land not in excess of that which is reasonably appropriate for residential purposes. The term personal residence does not include any personal property (e.g., household furnishings).

Question 3: We rent out our vacation home for part of the year, and the rent exceeds our expenses. As a result, every year we have income from the rent of the property. Who gets the income if the property is in a QPRT?

Answer: You must receive the income at least annually. No other person may receive income or principal during the term of the trust.

Question 4: May my QPRT hold any cash assets other than one residence?

Answer: The trust may hold cash sufficient to pay expenses and pay for improvements incurred prior to the contribution of cash or reasonably expected to be paid within six months after the contribution of cash.

Question 5: What happens if I want to move during the term of the trust?

Answer: The trustee may have the authority to sell the residence and purchase a replacement residence. You may make an additional contribution of cash to the trust within three months of the closing date.

Question 6: Who insures the residence?

Answer: The trustee may hold one or more policies of insurance on the residence and may hold proceeds payable as a result of damage to or destruction of the residence.

Question 7: What happens if I stop using the property as my residence?

Answer: The trust ceases to be a qualified personal residence trust if you no longer use the property as your residence. In this case, the trustee must, within 30 days after the date on which the trust has ceased to be a qualified personal residence trust, either distribute the assets to you or sell the residence and pay a qualified annuity interest to you for the balance of the trust term.

Question 8: What happens if I want to continue living in the residence after the trust term?
Answer: The QPRT is an irrevocable trust. This means that when the trust term ends, your beneficiary owns the property. Your trust must prohibit you from reacquiring ownership at the end of the trust. You may name an another trust as the beneficiary. The trustee may lease the property to your for fair market rent. This could be a good result for asset-protection and estate-planning purposes; these payments will be considered reasonable living expenses not gifts or fraudulent transfers.

Question 9: What happens if I am forced for health reasons into a nursing home?

Answer: If the residence is available at all times for your use as a residence during the term of the trust without regard to your ability to actually use the residence, the trust continues to be a QPRT. If the trustee rents the residence to an unrelated party, thereby making it unavailable to you, the trust would cease to be a QPRT.

Question 10: Does the QPRT offer any asset protection?

Answer: Yes. You have transferred the property out of your name. The trust owns the property; you retain only the right to live there for a term of years.