The Qualified Personal Residence Trust (QPRT) is a way to leave a house to a child or other devisee and significantly reduce the tax burden it would place on them.
Essentially, it involves placing the home in a trust for the benefit of the owner’s spouse or children. It allows the homeowner to retain access to the home, and all of the practical benefits of ownership. However, title of the home transfers into a trust which the homeowner controls.
This removes the value of the home from the owner’s taxable estate. Because a home is often the most valuable piece of property in an estate, this greatly reduces the tax burden on the homeowner’s devisees.
There are some caveats, however. The homeowner (or grantor) can no longer refinance or mortgage the home, since they no longer legally own it. The grant specifies a certain term of years during which the grantor-trustee is allowed to live in the home. When this expires, the grantor-trustee will have to move out, and ownership of the home will transfer to the person designated in the trust (usually a spouse or child).
If the grantor dies before the term expires, the residence transfers to the person designated in the terms of the trust.