Drafts an IRC §2702-compliant Qualified Personal Residence Trust agreement with safe harbor provisions under Rev. Proc. 2003-42 and Treas. Reg. §25.2702-5(c). Generates trust instrument, signature/notarization blocks, property exhibit, beneficiary schedule, and post-execution checklist. Use when drafting a QPRT for estate planning clients transferring a personal or secondary residence with a retained occupancy term to reduce gift tax valuation.
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Qualified Personal Residence Trust (QPRT) Agreement
description
Drafts an IRC §2702-compliant Qualified Personal Residence Trust agreement with safe harbor provisions under Rev. Proc. 2003-42 and Treas. Reg. §25.2702-5(c). Generates trust instrument, signature/notarization blocks, property exhibit, beneficiary schedule, and post-execution checklist. Use when drafting a QPRT for estate planning clients transferring a personal or secondary residence with a retained occupancy term to reduce gift tax valuation.
Qualified Personal Residence Trust (QPRT) Agreement
Drafts an irrevocable QPRT transferring a personal residence to remainder beneficiaries at a reduced gift tax value while the grantor retains rent-free occupancy for a specified term. Compliant with IRC §2702 and Treas. Reg. §25.2702-5(c).
Prerequisites
Gather before drafting:
Parties — Grantor, initial trustee, and all remainder beneficiaries (full legal name, address, DOB, relationship, SSN/TIN, percentage share)
Property — Legal description from deed, street address, tax parcel number, county/state; confirm principal vs. qualified secondary residence per Treas. Reg. §25.2702-5(c)(2)(i)
Valuation — Qualified appraisal of FMV as of anticipated transfer date
Planning parameters — Grantor's age, health/longevity factors, desired retained term (years), applicable IRC §7520 rate (transfer month or either of two preceding months)
Existing estate plan — Prior gifts, lifetime exemption usage, will/revocable trust, GST exemption allocation history
Governing law — State of situs; note if grantor domicile differs
Trust Instrument Articles
Art. I — Preamble & Definitions
Identify grantor, trustee, execution date, governing law state
Declare trust irrevocable; recite QPRT intent under Treas. Reg. §25.2702-5(c)
Define: Residence, Retained Interest Term, Term Expiration Date, Remainder Beneficiaries, §7520 Rate, Qualified Personal Residence
Art. II — Trust Property & Permitted Holdings
Item
Requirement
Exhibit A
Verbatim legal description; all easements and appurtenances
If reduced-rent occupancy permitted, document that estate tax inclusion results
Art. V — Remainder Beneficiaries & Distribution
Each beneficiary: name, address, DOB, relationship, SSN/TIN, percentage (must total 100%)
Contingent remainder: deceased beneficiary's share → descendants per stirpes
Election: outright distribution vs. continuing trust (address occupancy, rent allocation, buy-sell, expense allocation)
Deadlock: trustee authority to order appraisal and compel sale within [X] days of term expiration
Art. VI — Trustee Powers & Limitations
Authorized: maintain/repair/improve residence; pay taxes, assessments, insurance; hold cash within Treas. Reg. §25.2702-5(c)(5)(ii) limits; engage contractors
Prohibited during term: distribute to anyone but grantor (except operating expenses); sell/encumber without grantor's written consent (any sale must comply with replacement/GRAT rules)
Fiduciary duties: loyalty, impartiality, duty to inform; annual written accounting
Art. VII — Trustee Succession & Removal
Successor trustee(s) on death, resignation, or incapacity (two-physician certification or guardian appointment)
Resignation: 60-day written notice; removal by majority beneficiary vote after term
Grantor's removal power during term: limited to replacement with independent trustee (avoid IRC §2036)
Art. VIII — Tax Status & Reporting
Item
Rule
Income tax
Grantor trust (IRC §§671–679); all items on grantor's 1040
Gift tax
Form 709 in transfer year; gift = FMV − actuarial retained interest (§7520 + Pub. 1457)
GST
If skip persons among remaindermen, allocate on full FMV (not discounted gift)
Death during term
Full FMV in gross estate (IRC §2036(a)); stepped-up basis
Survival of term
Carryover basis = grantor's adjusted basis + gift tax on appreciation (IRC §1015)
Art. IX — Termination Events
Event
Result
Grantor survives term
Deed transfer; final accounting; basis documentation
