A qualified residence trust is a type of account meant to allow someone to gift their residence at a greatly reduced value. The purpose of this type of Arizona trust is to take the residence out of the asset column of the settlor, or creator of the qualified trust account, which in turn reduces the tax liability for the estate upon the death of the settlor. The value of such a trust lies in the benefit of not dealing with an estate that has the reduced tax burden, making it easier for those left behind to resolve.

This type of Arizona trust is regulated by the Internal Revenue Service and is different from a revocable living trust in that this particular account focuses specifically on the residence of the person that created it. It is meant for individuals that know they want to gift their home to a family member, generally a child, in the future and want to reduce the tax burden of doing so for the person receiving the gift. The qualified residence trust allows the person to continue to live in the home for the pre-set time stipulated in the trust agreement (this is usually set for the remainder of the person’s lifetime) and is known as retained interest.

Once that period of time is up or the pre-set course of actions detailed in this Arizona trust document have come to pass, then the beneficiary of the trust claims ownership of the residence in question. By this point, the gift tax is minimal and the beneficiary of the residence has little – to no – out of pocket cost.

This type of trust is an irrevocable type and means that once the terms of the trust come due, the settlor of the account cannot change course and retain ownership of the home, nor can the individual sell the home. When making the decision to pursue this type of Arizona trust, it is best to talk over the terms of it with family members and a qualified attorney to ensure that you don’t end up locked into a qualified personal residence trust if that wasn’t what you intended. Read all of the paperwork thoroughly and make sure that the terms of the trust are agreeable to your situation. It is also important to talk over everything with your family members, so that no one is caught off guard.

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