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THE PERSONAL RESIDENCE TRUST
Planners wishing to give their home to children or others may find the Personal Residence Trust (PRT) or GRIT to be the vehicle of choice. When using the Personal Residence Trust, the grantor transfers the home to the trust, lives in the home (hopefully, for life), and freezes the value of the home for estate tax purposes. While this is a widely used procedure, you should be aware that you will, at some future time, have passed the personal residence completely to your offspring. You will no longer own the residence. Under the plan envisioned by those who advocate the use of this trust, you would pay rent to your child once the personal residence had completely passed from your ownership. Many planners object to the use of this vehicle because they never want to see the parent without ownership of his or her personal residence. Knowing that a wide variety of life's vicissitudes await most families, many planners fear that a lawsuit against the child who becomes the owner ... might, at some future time, cause the parent to lose his or her residence. Knowledgeable planners fear that the parents might wind up "out in the street." Given that warning, objectivity demands that the PRT's good points be highlighted. For a single parent with only one child who is not in a highly litigious profession, the PRT may work very well. As the purpose of the PRT is to save estate taxes, it should be used, of course, only by families that have a highly taxable estate. For charitable families, The Charitabale Life Estate Deed offers some of the tax saving features of the PRT. If estate tax savings is a major goal, the family might decide that the parent will merely take a life estate in the home and make a charitable cause the "remainderman" of the life estate. This procedure also produces some income tax benefits. To make our cause the remainderman of a Life Estate Deed, just tell your attorney to re-do the deed, to make you the life tenant and to make "The Foundation" the remainderman. |
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