Personal residence trusts are used to transfer a grantors residence out of the grantors estate at a low gift tax value. Once the trust is funded with the grantors residence, the residence and any future appreciation of the residence is excluded from grantors estate. This type of trust is an irrevocable split interest trusts. The transfer of the residence to the trust constitutes a completed gift. The split interest character of the trust is as follows: the grantor retains the right to live in the house for a number of years, rent free, and then the remainder beneficiaries of the trust become fully vested in their interest.
This form is a generic example that may be referred to when preparing such a form for your particular state. It is for illustrative purposes only. Local laws should be consulted to determine any specific requirements for such a form in a particular jurisdiction.
A detailed description of the Washington Personal Residence Trust (WORT): The Washington Personal Residence Trust (WORT) is a legal and strategic estate planning tool that allows homeowners in the state of Washington to transfer their primary residences or vacation homes to an irrevocable trust while still retaining certain benefits such as continued use and occupancy for a specified period. Key benefits of establishing a Washington Personal Residence Trust include estate tax savings, asset protection, probate avoidance, and the ability to maintain control over the use and distribution of the property during the trust term. One primary objective of the WORT is to reduce the value of the homeowner's estate for estate tax purposes. By transferring the property to the trust, the homeowner can effectively remove the value of the property from their taxable estate, while still enjoying the use and enjoyment of the residence for a predetermined period. There are different types of Washington Personal Residence Trusts, each tailored to specific needs and goals: 1. Retained Interest Personal Residence Trust (RIOT): This type of WORT allows the granter to retain the right to live in the residence for a fixed number of years while transferring ownership to the trust. After the term ends, the property passes to the beneficiaries with reduced gift or estate tax implications. 2. Qualified Personnel Residence Trust (PRT): This type of WORT is commonly used when the primary objective is to transfer the property to heirs while minimizing estate taxes. With a PRT, the granter retains the right to live in the residence for a predetermined term, after which the property passes to the beneficiaries. The value of the gift to the PRT is determined at the inception of the trust, potentially reducing gift and estate taxes significantly. 3. Non-Grantor Personal Residence Trust (NG PRT): Unlike the RIOT and PRT, the NG PRT does not provide the granter with the continued right to use and occupy the property after its transfer. Instead, the NG PRT acts as a means to transfer the primary residence or vacation home to beneficiaries while potentially minimizing gift and estate taxes. It is crucial to consult with an experienced attorney or estate planner specializing in Washington state law to determine the most suitable type of Personal Residence Trust based on personal circumstances, goals, and asset protection needs. Understanding the intricacies of the trust structure, tax implications, and legal requirements is paramount to ensure a successful implementation of the Washington Personal Residence Trust.
