Florida QPRT (Qualified Personal Residence Trust): Options:
Often clients want to make sure their homes go to their children. In Florida, a homestead will automatically go to your descendants and be protected. One of the problems is that although the home is generally not subject to Florida Probate, the value of the home at the time of their death is subject to estate tax. Once option of leaving a home to children is to use a special trust designed for the home. There are many advantages and disadvantages of using a Qualified Personal Residence Trust in Florida (QPRT).
Andrew Ewalt recently wrote an article on this on his Legal Blog where he listed the basic Pros and Cons. It is important that there are risks involved with a QPRT and each persons situation needs to be evaluated to determine if this is the right way to deal with the transfer of one’s Florida Homestead. QPRT’s are not for everyone, and many who used them in the past have ended them because of the changes in tax laws and how they impact their individual estate plan. As with all Florida Estate Planning it is important to review and update you estate plan on a regular basis.
The Advantages of a QPRT that Andrew list are
1. A QPRT removes any appreciated value of a house from a parent’s estate which can help reduce estate tax liability.
2. The parents can continue to live in the house during the term of the trust.
3. Both residence and vacation homes can qualify.
4. Often more than one home can be protected.
5. When the trust term ends the children receive the home.
The potential disadvantages of a QPRT are:
1. Capital gains tax can be a significant factor on the sale of the home because the cost basis of the house remains the same as it was for the parents. (as the capitol gains is suppose to increase shortly, this can be a significant issue)
2. If the parents die before the trust terminates the home will not be devalued for estate tax purposes. Thus it is very important the parents survive for the term of the trust.
3. Children will become their parents landlord when the trust terminates. As such children could evict their parents or increase the rent to live in the home.
4. These trusts are very complicated. In order to set one up you will need a lawyer.
If you live in Jacksonville or have property in Florida that you are considering placing in a Qualified Personal Residence Trust (QPRT) you should discuss your personal situation by Contacting a Jacksonville Estate Planning Attorney