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Tampa Personal Residence Trusts Attorney

Often, an individual’s most valuable asset is real estate, usually their home. Owning your own home brings a wealth of benefits, both financial and otherwise. Your home is a place of comfort, safety, and family. It can also be a wise financial investment. However, your home may become a major tax liability at the time of your death. Federal law levies an estate tax on your assets at the time of your death. Paying this tax out of your estate can be a huge burden on your family. You may try to avoid paying an estate tax on your home by transferring title to a loved one. However, you may then incur a hefty gift tax. Fortunately, with some savvy estate planning, you can gift your residence to your beneficiaries, while also receiving a discounted gift tax rate. This can be accomplished by establishing a Personal Residence Trust, or PRT.

Who Benefits from a PRT?

When you create a PRT, as the grantor you transfer ownership of your home to the trust. You can do this with your primary residence or a vacation home, like those owned by many Tampa residents. Of course, you may want to retain the right to use your home. Through a PRT, though the trust owns the home, you are allowed to live in it for a specified period of time. You can choose how long this period will last. After that time frame expires, ownership of the home will transfer out of trust to your beneficiaries. Many people choose to leave their home to their children, or other relatives. Like with most other trusts, you can select the beneficiary of your PRT.

Both you and your beneficiary benefit from a PRT. As explained below, there are many tax advantages to this type of trust. You can reduce or avoid estate and gift taxes by implementing a PRT. Simultaneously, you can save your beneficiaries from an otherwise costly tax bill.

Federal Tax Advantages

By placing your home into trust, you are basically putting a hold on the home value for tax purposes. This means that when your home passes to your beneficiary, its current fair market value will be taxed, as opposed to its actual future value. This can save your beneficiary from a high tax bill. Additionally, depending on the term set in your trust, your home could appreciate greatly. So, instead of paying tax on that appreciated value, your beneficiary will only pay tax on the current value.

The only real downside to a PRT is the requirement that you, the grantor, must survive the term of the trust. In other words, if your PRT specifies you can use the home for 15 years, you must outlive that period of time. Based on your age and health, you should give careful consideration to how long your trust term is.

Call Reputable Tampa Trusts Lawyer

Tax laws are constantly changing, and you may need to adapt your current estate plan to benefit from tax advantages. David Toback, Attorney at Law, has been doing just that for Tampa residents for over 17 years. With his extensive tax and estate planning experience, David Toback can help you meet your estate planning goals. Contact him today to schedule a consultation.

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