Personal Finance: Ask the Experts: Can a QPRT be used for residential rental property?

Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

December 6, 2012

Can a QPRT be used for residential rental property?

Q: Can a Qualified Personal Residence Trust or "QPRT" be used for a residential rental property? I do not live at this residence which has a value of about one million. I would like to protect this property from as much taxation as possible and give it to someone who is unrelated to me. --Margaret, Santa Barbara, CA

A: A Qualified Personal Residence Trust ("QPRT") cannot be used for a rental property. Under the QPRT rules, the residence must be occupied by the person creating the trust during the QPRT term. If you put the residence in the QPRT, you could occupy the house, but you cannot rent it out to a third party and retain the rental income.

If you want to shield this property from taxation, I would suggest speaking to an estate planning attorney as soon as possible. As you may know, there are opportunities for gifting in calendar year 2012 that will not be available in the future unless Congress changes the estate and gift tax law.

There are a variety of techniques that can be used to transfer assets out of your taxable estate, but each comes with restrictions on how much control you may retain and what rights you may retain with respect to the property. An experienced estate planning attorney can work with you to determine the best options based on your current needs and your future goals.

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Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

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Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

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