This is the sixth in a series of 23 tax tips that AdvisorOne will publish on each business day in March as part of our Tax Planning Special Report (see our Special Report calendar for a more complete list of topics to be covered and experts who will deliver their insights).
The tax tip today comes from Benjamin Ledyard, director of Wealth Strategies and regional director of the Mid-Atlantic for Silver Bridge Advisors. During his 15 years of experience in wealth management, he has developed expertise in financial, tax, wealth transfer, risk management, investment oversight, family governance, business succession, executive benefits and philanthropic planning.Ledyard holds a JD from Widener University School of Law and a bachelor’s degree from the University of Delaware.
The Tip: Consider Transferring a Residence to a QPRT
Effective Jan. 1, The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act), provides a wonderful opportunity for families and individuals to transfer wealth. But it’s scheduled to sunset at the end of 2012, so the time for action is now. The Act’s 500% increase in the gift tax exemption, for $1 million to $5 million, opens the window for more sophisticated transfer strategies, especially for wealthier families and individuals, according to Ledyard (left).
Now is a good time to look at the qualified personal residence trust (QPRT), Ledyard says. This is an irrevocable trust funded by the homeowner’s interest in the residence. The homeowner transfers the house’s title to the trustee of the QPRT, but retains the right to live in the house rent free for the term of the trust. At the end of that time, the residence passes to the beneficiaries of the QPRT—typically the homeowner’s children.