As with any legal document, it is important that you have a professional draft of the agreement. Together you can decide who the trustees and beneficiaries are and how long the trust will last. Keep in mind that irrevocable trusts are almost impossible to change once they go into effect.
The next step would be to transfer your residence to the QPRT. This is done by creating a new deed that transfers the house from the owner’s name to the name of the QPRT, which will be recorded in the property records. If you have your original deed, you can easily make changes without the cost of an attorney. Simply copy the deed to your computer, make the changes regarding the part about the transfer or purchase of the property and keep the rest the same. You will not know the page number of the document registered with the county clerk’s office, so leave that part blank. Everything else should stay the same. A guarantee deed will suffice. The third step is to obtain a valid real estate appraisal.
The third step is to report the gift to the IRS. This is done by filling out a Form 709, United States Gift and Generation Transfer Tax Return. This form must be completed and filed with the IRS by April 15 of the year following the year the property was transferred to the QPRT. Example: the property is transferred on July 15, the return is due the following April. Once it’s completed, the best part is that you can reside at home and live your life as usual.
After the predetermined number of years for the QPRT expires, ownership is transferred to the beneficiaries as detailed in the QPRT. This is accomplished by registering a new deed that transfers the residence from the trust’s name to the name of the beneficiaries and documenting it in the property records.
The last step is to pay a fair market rent for the property if the former owner wants to continue living there. The rent will transfer more assets to the beneficiaries without gift taxes and reduce the size of the taxable estate.
