If you’re interested in reducing your taxable estate, consider using a qualified personal residence trust (QPRT). You can transfer your principal residence or a vacation home into the trust, which has a finite life. After the trust term (perhaps 10 or 15 years), the house will go the trust beneficiaries, probably your children.
Making a deferred gift in this manner will slash the amount of gift tax that you owe. After the trust term, you can continue to live in the house, paying rent to the new owners–your children. As long as you pay a fair amount, these rental payments will remove more money from your taxable estate without generating any gift tax.
Using a QPRT allows you to give away your house but retain your entire securities portfolio. Holding on to your securities may be important because the decline in interest rates and in the stock market have made it more difficult for many people to live on their savings.
