As with any legal document, it is important that you have a professional draft the agreement. Together you can decide on who the trustees and beneficiaries are and how long the trust will last. Keep in mind that irrevocable trusts are nearly impossible to change once it goes into effect.
The next step would be to transfer your residence to the QPRT. This is done by creating a new deed that transfers the home from the owner’s name to the QPRT’s name, which will be recorded in the land records for the property. If you have your original deed, you can make the changes easily without the cost of an attorney. Simply copy the deed into your computer, make the changes regarding the part about the transfer or purchase of the property and keep the rest the same. You won’t know the page number of the document recorded in the County Clerk’s office so leave that part blank. Everything else should remain the same. A warranty deed will suffice. The third step is to obtain a valid real estate appraisal.
The third step is to report the gift to the IRS. This is done by filling out a Form 709, United States Gift and Generation-Skipping Transfer Tax Return. This form must be completed and filed with the IRS on April 15th of year following the year in which the property was transferred into the QPRT. Example: Property is transferred on July 15, the return is due by the following April. Once that is completed the best part is that you can reside in the home and live your life as usual.
After the predetermined number of years for the QPRT ends, the property is transferred to beneficiaries as detailed in the QPRT. This is accomplished by recording a new deed that transfers the residence from the trust’s name to the beneficiaries name and documenting it in the land records for the property.
The final step is to pay a fair Market rent for the property if the former owner wants to continue living there. The rent will transfer more assets to the beneficiaries free of gift taxes and will reduce the size of the taxable estate.