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For many people, buying and keeping a home in the family is an important representation of their life’s work. However, a house could be in jeopardy if its owner needs to seek out nursing care. The value of a home may also trigger taxes on an estate.
Creating a Qualified Personal Residence Trust in Raleigh is one way of allowing a person to remain in their home while transferring ownership to another party. This strategy can also help avoid complications when applying for Medicaid or entering the probate process. For more information about this valuable estate planning tool, speak with a knowledgeable attorney.
Establishing a Trust has many financial benefits. Once property goes into a Trust, the government no longer considers it to be an asset of the original owner. Qualified Personal Residence Trusts function on this same principle.
This concept applies if an elderly person seeks Medicare benefits when moving into a nursing home. Placing a family home into a Trust means that it will not be calculated when determining a person’s financial eligibility for Medicaid. However, the home needs to be in a Trust at least five years prior to applying for Medicaid under section 1917(c)(1)(B)(i) of the Social Security Act.
Trusts also help to avoid taxation of a person’s estate. While North Carolina does not levy an estate tax, the federal government does. Placing a home into a Trust can exclude this property from the valuation of an estate and prevent the payment of taxes. Furthermore, moving a home to another party through a Qualified Personal Residence Trust helps to avoid the gift tax. A Raleigh attorney can further explain these benefits of Qualified Personal Residence Trusts.
What separates a Qualified Personal Residence Trust from other Trusts that could accomplish the transfer of real estate is a provision that allows an original homeowner to continue living in the house. Normally, creating a Trust causes an individual to immediately lose all rights to property that they place in the Trust.
However, a Qualified Personal Residence Trust operates differently. Here, the original owner can remain in a home placed in Trust for a specified amount of time. Essentially, the original owner is now a tenant of the Trust but does not have to pay rent and cannot be evicted by the trustee.
Once the Trust comes to an end, the named beneficiary takes permanent and total control of the property. Because of these provisions, a Qualified Personal Residence Trust can be a way to ensure the future transfer of real estate to another party while remaining in the house.
The question of what will happen to a family home is a top priority for many during estate planning. Real estate carries significant value and could cause problems with taxation or Medicaid benefits in the future.
If you wish to plan for your family home, speak to a skilled attorney about setting up a Qualified Personal Residence Trust in Raleigh. These Trusts place a home into another person’s possession while allowing the previous owner to continue living on the property. However, this strategy is most effective when done far in advance, so contact our firm today to get started.