QPRT Calculator (Qualified Personal Residence Trust)

A QPRT is an irrevocable trust that holds your primary residence or vacation home for a fixed term. You transfer the home to the trust at a discounted gift-tax value - you keep the right to live there during the term, and that retained interest reduces the taxable gift. At the end of the term, ownership passes to your beneficiaries (often children), removing the home's full future value from your taxable estate. The IRS 7520 rate in effect at the time of transfer is used to calculate the discount. This is educational, not legal or tax advice.

A QPRT works best when: (1) the home is high in value and expected to appreciate significantly, since all post-transfer appreciation escapes estate tax; (2) the IRS 7520 rate is relatively low, which increases the discount on the gift; and (3) you are confident you will survive the trust term, since dying during the term undoes the tax benefit. It is least useful for modest homes, during high 7520 rate environments, or if your estate is already below the exemption threshold. Consult an estate attorney to model your specific scenario.

If the grantor dies during the QPRT term, the full date-of-death fair market value of the home is pulled back into the taxable estate under IRC Section 2036, eliminating the intended tax benefit. You are no worse off tax-wise than if you had done nothing, but you will have incurred legal costs and the trust structure was wasted. Estate planners typically set the term length so the grantor has a high actuarial probability of surviving it - often 5 to 10 years for a healthy grantor in their 60s. Shorter terms reduce mortality risk but also reduce the gift-tax discount.

A QPRT is specific to real estate - it can only hold a personal residence. A Grantor Retained Annuity Trust (GRAT) can hold any asset: stocks, business interests, or other investments. Both use a retained interest to reduce the taxable gift. The GRAT's hurdle rate is the IRS 7520 rate: only appreciation above that rate passes transfer-tax free. The QPRT's hurdle is simpler - any appreciation during and after the term escapes estate tax. QPRTs carry mortality risk; GRATs are zeroed out if the grantor dies early (assets return to estate but with no tax penalty). Both require professional legal setup.