As with any legal document, it is important that you have a professional draft of the agreement. Together you can decide who the trustee and beneficiaries are and how long the trust will last. Keep in mind that an irrevocable trust is nearly impossible to change once it enters into force.
The next step is to move your residence to QPRT. This is done by making a new deed that transfers the house from the owner’s name to the name of the QPRT, which will be recorded in the land records for the property. If you have your original deed, you can make changes easily without attorney’s fees. Just copy the deed to your computer, make changes to the section regarding the transfer or purchase of property and leave the rest the same. You won’t know the page numbers of documents registered with the Regional Registrar’s office, so leave that section blank. Everything else must remain the same. A deed of guarantee will suffice. The third step is to get a valid real estate appraisal.
The third step is to report the gift to the IRS. This is done by filling out Form 709, United States Generation-Skipping Transfer and Transfer Tax Returns. This form must be completed and filed with the IRS by April 15 of the following year following the year the property was transferred to QPRT. Example: Property is transferred on July 15th, the return is due the following April. Once that’s done, the best part is that you can stay home and live your life as usual.
After the predetermined number of years for the QPRT expires, the property is transferred to the beneficiary as detailed in the QPRT. This is done by recording a new deed that transfers the residence from the name of the trust to the name of the beneficiary and documenting it in the land records for the property.
The final step is to pay Fair Market rent for the property if the previous owner wishes to continue living there. The lease will transfer more of the asset to the beneficiary free of the gift tax and will reduce the size of the taxable property.
