A QPRT, or qualified personal residence trust, is an estate planning tool that allows an individual to transfer a personal residence or vacation home to beneficiaries at a reduced gift tax value while retaining the right to live in the property for a specified term. The value of the taxable gift is discounted based on the retained term and IRS actuarial assumptions. If the grantor survives the term, the residence passes to beneficiaries or a trust, removing future appreciation from the grantor's estate. If the grantor dies during the term, the property is pulled back into the estate. QPRTs can be powerful for high-net-worth clients with appreciating real estate, but they are rigid and require careful design and administration.

Estate planners recommend QPRTs when clients own valuable residences and are comfortable committing to a long-term plan. Advisors coordinate with attorneys to align life insurance, liquidity, and housing needs with the QPRT structure. Life insurance may be used to provide funds if rent must be paid after the retained term or to equalize inheritances among heirs who do not receive the residence. Clients must understand the risks: loss of flexibility, possible need to move or pay rent, and the consequence if they die during the QPRT term. Clear explanations, modeling, and collaboration among tax professionals and advisors are critical to successful QPRT implementation.