Since your home may be one of your most valuable assets, this can be a very effective part of your wealth preservation plan. Learn more about qualified personal residence trust in New York in this presentation.

1. What Is a Qualified Personal Residence Trust? www.myestateplan.com
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“Since your home may be one of your most valuable
assets, this can be a very effective part of your
wealth preservation plan.”
WHAT IS
A QUALIFIED PERSONAL RESIDENCE
TRUST IN NEW YORK?
MARK S. EGHRARI
NEW YORK ESTATE PLANNING ATTORNEY

2. What Is a Qualified Personal Residence Trust? www.myestateplan.com
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The federal estatetax isa looming threat for people who have been able to
accumulatesignificant wealth.
If you are exposed to the estatetax, a qualified personalresidencetrust could
help you gainestatetax efficiency. Before we provide an explanation, weshould
look at the federal transfer tax parametersso that you candeterminetheextent of
your liability.
FEDERAL ESTATE TAX
There is a federalestatetax credit or exclusion. Thisis the amount that you can
transfer to others tax-free. During the2014 calendar year, the federal estatetax
exclusionis $5.34 million. Thereare annualadjustmentstoaccount for inflation,
so it may go up a bit next year.

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It should be noted that there is an unlimited maritaldeduction. You cantransfer
unlimited assetsto your spouse free of the estatetax. The $5.34 million exclusion
appliesto transfersto people other thanyour spouse.
The top rateof the federal estatetax is 40 percent, so we are talking about a very
significantsourceof asset erosion.
FEDERAL GIFT TAX
The federal gift tax comesinto play when you are looking at qualified personal
residencetrusts, so
we should explain
thistax as well.
The tax mandoes
not want you to
give giftswhile you
are living to avoid
the estatetax, so
we have a federal
gift tax. Thistax is
unified with the
federal estatetax.
The $5.34 millionexclusionapplies to lifetimegiftsthat you give along with the
value of the estatethat you are passing on to your heirs.

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Thistax carriesthesame 40 percent maximum rate, and the unlimited marital
deductionextendsto lifetimegifting.
QUALIFIED PERSONAL RESIDENCE TRUSTS
Now that we have shared the necessarybackground information, wecanlook at
qualified personalresidencetrusts. The idea is to fund the trust with your home.
You namea beneficiarywhowill assumeownership of the homeafter thetrust
term expires. Thisterm is referred to as the retained incomeperiod.
During the retained incomeperiod, you continue to residein the home as usual.
You decideon the length of thisterm. It can be five years, 10 years, 15 years, or
whatever you choose.
When you convey the
home intothe
qualified personal
residencetrust, you
are removing the
home from your
estatefor tax
purposes. That'sthe
good news. The bad
news is that you are
giving a taxablegift
to the beneficiary.

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However, thetaxablevalue of the gift is going to be considerablyless thanthe
actualmarket value of the home. Thisis becauseof the retained incomeperiod.
Imaginetrying to sell your home on the open market. A buyer is interested, but
you tell her that she cannot assume ownership of the home for 15 years. The
buyer would be unwilling to pay the full market value under that stipulation.
The Internal Revenue Servicetakes thisdynamic intoaccount whenthe taxable
value of the gift is being calculated. Asa result, the taxablevalue is greatly
reduced.
When the transfer takesplaceat theend of the retained incomeperiod, the gift
tax will be applicable, but thetax savingswill be considerable.
There is something toconsider when you aresetting the durationof thetrust
term. If you were to pass awaybefore the retained incomeperiod had expired, the
strategywould fail, and the home would once againbecomepart of your taxable
estate.
The longer you stayin the home, the greater thetax savingswill be. However, you
do have to be conservativein light of the fact that thestrategycanfall apart ifyou
pass awaybefore the expirationof theterm.

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SUMMARY
High net worth individualswhoare exposed to federal transfer taxescangaintax
efficiencythrough thecreationof a qualified personalresidencetrust.
When you executethisstrategyproperly, you cansignificantlyreducethetaxable
value of your home. Sinceyour home may be one of your most valuableassets,
thiscan be a very effective part of your wealth preservationplan.
To learn more about qualified personalresidencetrusts, set up a consultation
with a licensed estateplanning attorney.
REFERENCES
The CPA Journal
http://www.nysscpa.org/cpajournal/2005/1205/essentials/p52.htm
Journalof Accountancy
http://www.journalofaccountancy.com/Issues/2006/Oct/TheAbcsOfQprts.htm

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About the Author
MarkS. Eghrari
Mark S. Eghrari is an attorney in private practice in Smithtown, New
York. He has been in practice since 1988. Mark S. Eghrari provides
extensive estate and tax planning services to individuals and
businesses. Mr. Eghrari’s primary focus is helping clients avoid
probate, minimize or eliminate Federal and State Estate taxes and
protect their assets from the high cost of nursing care, if they become
ill. Mr. Eghrari’s expertise is in providing unique and innovative
estate planning solutions that create a secure future for his clients and their loved ones. Mr.
Eghrari is a member of the American Bar Association and New York State Bar Association as
well as the National Academy of Elder Law Attorneys and the American Academy of Estate
Planning Attorneys.
Mr. Eghrari completed his undergraduate work at Lafayette College in Easton, Pennsylvania
and received his MBA in banking and finance from Hofstra University on Long Island. He
earned his Juris Doctorate from the Hofstra University School of Law, where he was a member
of the Law Review. While in law school, Mr. Eghrari gained practical experience in the
corporate tax department of Citicorp in New York city.
Mark S. Eghrari and Associates PLLC
www.myestateplan.com
50 Karl Avenue, Suite 202
Smithtown, NY 11787
Phone: (631) 265-0599
Fax: (631) 265-0754