Qualified Personal Residence Trust (QPRT) Attorneys

A qualified personal residence trust lets you give your home to your children at a fraction of its value for gift tax purposes while you keep living in it for a term of years you choose. If you outlive the term, the house and all of its appreciation are out of your taxable estate. It is one of the few estate tax techniques that works with an asset most families already own and do not intend to sell.

The QPRT is a trade. You give up ownership of the home at the end of the term, and you accept that the house will not receive a new income tax basis at your death. In exchange, you remove what is often a family’s largest and fastest-appreciating asset from a New York, Connecticut, or federal estate tax calculation, using far less gift tax exemption than an outright gift would require.

Milvidskiy Law Group P.C. drafts QPRTs, handles the deed and the title work, models the gift value and the term with your CPA, and plans for what happens when the term ends.

How a QPRT Works

The transfer and the retained term

You deed your primary residence or a vacation home to an irrevocable trust and reserve the exclusive right to live in it, rent-free, for a term of years: ten, fifteen, or whatever period fits. During the term you continue to pay the property taxes, insurance, and ordinary maintenance, and you continue to claim the income tax benefits of home ownership because the trust is treated as yours for income tax purposes. From the outside, nothing changes.

The discounted gift

The gift you make when the trust is funded is not the full value of the house. It is the value of what your heirs will receive at the end of the term, calculated under Internal Revenue Service tables using the interest rate the IRS publishes for the month of the transfer, your age, and the length of the term. A longer term and a higher interest rate produce a smaller taxable gift. Suppose a home worth $2 million is placed in a fifteen-year QPRT; depending on the rate and the grantor’s age, the reportable gift might be a fraction of that figure, and every dollar of appreciation over the fifteen years passes to the children with no additional gift or estate tax. The numbers are illustrative; we run the actual calculation before anything is signed.

The gift is reported on a federal gift tax return and uses part of your lifetime exemption, which is $15,000,000 per person for 2026 according to the IRS. It does not qualify for the annual exclusion because the children’s interest is a future interest.

The end of the term

When the term ends, the trust either distributes the house to your children or continues to hold it for them in trust. You no longer have a right to live there. Most clients want to stay, and the solution is a written lease at fair market rent. The rent is a further transfer to your children that is not a gift, because you are paying for something you receive. The lease must be genuine, at a market rate supported by an appraisal or broker opinion, and actually paid.

What Happens if You Die During the Term

The QPRT is a bet on your own survival. If you die before the term ends, the full date-of-death value of the home is included in your taxable estate, and the exemption you used on the original gift is restored. You are no worse off than if you had done nothing, apart from the cost of the trust, but you have gained nothing either. For that reason the term is chosen conservatively. A seventy-year-old in good health might use a ten-year term; a fifty-five-year-old might use twenty. A married couple can each place a half interest in a separate QPRT with different terms, which diversifies the mortality risk and can produce additional valuation discounts for the fractional interests.

The Basis Trade-Off

A home you own at death generally receives a new income tax basis equal to its value at that time, which erases the capital gain that built up during your life. A home that passed through a QPRT does not. Your children take your basis, and if they later sell, they pay capital gains tax on the appreciation since you bought the house.

Whether that matters depends on the estate tax you would otherwise pay. If your estate is over the New York, Connecticut, or federal threshold, the estate tax saved on the house usually exceeds the capital gains tax deferred and possibly never paid, because children who keep the house never sell. If your estate is below every threshold, the QPRT costs your family a basis step-up and saves them nothing. That comparison is the first thing we run.

State Considerations

The QPRT is a federal technique, but state taxes change the arithmetic. New York’s estate tax exclusion is $7,350,000 for deaths in 2026, less than half the federal figure, and New York’s cliff can tax the entire estate once it exceeds the exclusion by a small margin. For a New York family with a valuable home, the QPRT often matters for state tax even when no federal tax is at stake. New York has no gift tax, though taxable gifts made within three years of death are added back to the estate.

Connecticut taxes lifetime gifts, so the QPRT gift counts against the Connecticut exemption, which for 2026 equals the federal amount of $15,000,000. New Jersey has no estate tax and no gift tax; its inheritance tax does not reach transfers to children, so a QPRT for a New Jersey resident is a federal planning tool.

Local property tax matters also deserve attention. Senior citizen and veteran exemptions, and programs such as New York’s STAR benefit, have ownership and residency requirements that a trust transfer can affect. We check the specific program before the deed is recorded rather than after a benefit disappears.

Practical Points

• Mortgages. A mortgaged home complicates a QPRT: each principal payment you make can be an additional gift, and the lender’s consent may be required. Paying off the mortgage first, or using another asset, is often cleaner.
• Selling during the term. The trust can sell the house and buy a replacement, or hold the proceeds for a limited period under rules that convert the trust into an annuity trust if no replacement is purchased. Downsizing plans should be discussed before funding.
• One residence per trust. A QPRT holds a single residence. A primary home and a vacation home go into separate trusts, each with its own term.
• Homeowner’s insurance and title. The policy and the title insurance are updated to reflect the trust as owner.
• Generation-skipping. A QPRT is an inefficient vehicle for grandchildren because the exemption cannot be allocated until the term ends. Where the goal is multigenerational, a dynasty trust funded with other assets usually works better.

When a QPRT Is Not the Right Tool

A QPRT is the wrong choice when your estate will fall below every applicable threshold, because the lost basis step-up then costs more than the technique saves. It is the wrong choice if you may need to sell the home and use the proceeds for your own support, if your health makes surviving the term doubtful, or if you cannot accept paying rent to your own children later. Families whose concern is long-term care rather than estate tax should look at a Medicaid asset protection trust, which is drafted to different rules and preserves the basis step-up. Our tax planning and irrevocable trust pages set out the alternatives.

What Our QPRT Service Includes

• An estate tax and basis analysis with your CPA that compares the QPRT with holding the home, gifting it outright, or using a different trust.
• Selecting the term and, for couples, structuring separate trusts with different terms.
• Drafting the trust, including the replacement-residence and sale provisions, trustee succession, and the post-term holding structure for the children.
• Preparing and recording the deed, coordinating with the lender and title company, and updating insurance.
• The appraisal, the gift tax return, and the file that supports the reported value.
• Planning the end of the term in advance: the lease, the rent appraisal, and the transition of expenses, with annual review through our Client Care Program.

Schedule a QPRT Consultation

If your home is a large share of a taxable estate and you intend to keep it in the family, a QPRT deserves a place on the list of options. Our attorneys practice in New York, New Jersey, and Connecticut. Contact Milvidskiy Law Group P.C. to schedule a consultation.

This page is provided for general informational purposes only and does not constitute legal advice. Laws differ by state and change over time. Tax figures are as of the date stated and change annually. For advice about your situation, consult a qualified attorney.