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QUALIFIED PERSONAL RESIDENCE TRUST

A Qualified Personal Residence Trust (“QPRT”) is a type of trust specifically authorized by theInternal Revenue Code. It permits you to transfer ownership of your residence to your familyduring your lifetime and retain the exclusive right to live in theresidence, while reducing the sizeof your estate for estate tax purposes.

The residence is transferred to the Qualified Personal Residence Trust for a designated initialterm of years. Provided you survive the initial term of years, ownership of theresidence will betransferred to your family at a fraction of its fair market value. If you die during the initial termof years the property will be brought back into your estate, but you will be no worse off than hadyou not created the Qualified Personal Residence Trust. You may transfer up to two (2) personalresidences into Qualified Personal Residence Trusts.

The Qualified Personal Residence Trust is a particularly noteworthy estate planning tool toreduce federal estate taxes because it permits you to transfer a residence out of your taxableestate while retaining the right to use it during your lifetime. The gift for federal gift tax purposesis based upon IRS published interest rates at the time of the transfer, and this rate does not takeintoconsideration actual appreciation in the value of the property. Accordingly, these trusts areparticularly useful to transfer residences in which significant future appreciation is anticipated

The Qualified Personal Residence Trust permits you tocontinue to enjoy your residence,knowing that the value at the date of death will not be included in your estate.

During the term of years of the trust you have the absolute right to remain in the residence rentfree. After the initial term you can be granted the right to rent the residence for the balance ofyour lifetime for its fair rental value.

During the term of years, you can be the sole trustee or a cotrustee of the trust with completecontrol over all decisions of the trust and the assets in the trust. You may also sell the residenceand buy another residence during the trust term.

Because the Qualified Personal Residence Trust is a “grantor trust” under the income tax laws,during the initial term of years you are treated as the owner of theproperty for income taxpurposes. Therefore, all items of income, gain, loss and deduction with respect to the trust aretreated on your personal income tax return. So for example, the deduction for real estate taxesremains available to you. In addition, favorable capital gains treatment, including capital gainrollover and the $250,000 exclusion of gain are still available to you.

SAMPLE PLANNING TOOLS

Family Limited Partnerships

Gift Trusts for Family Members

Lifetime Family Trusts

Grantor Retained Annuity Trust

Charitable Remainder Trust

Private Foundations

Sale to Grantor Trust

Beneficiary Defective Trust