As with any legal document, it is important that you have a professional draft of the agreement. Together you can decide who the trustees and beneficiaries are and how long the trust will last. Keep in mind that irrevocable trusts are nearly impossible to change once they go into effect.

The next step would be to transfer your residency to the QPRT. This is done by creating a new deed that transfers the house from the owner’s name to the QPRT’s name, which will be recorded in the property records. If you have your original deed, you can easily make changes without the cost of a lawyer. Simply copy the deed into your computer, make changes to the part about transferring or buying the property, and keep the rest the same. You will not know the page number of the document filed with the county clerk’s office, so leave that part blank. Everything else must remain the same. A warranty deed will suffice. The third step is to obtain a valid real estate appraisal.

The third step is to report the gift to the IRS. This is done by completing a Form 709, United States Generation Skip and Gift Transfer Tax Return. This form must be completed and filed with the IRS by April 15 of the year following the year in which the property was transferred to the QPRT. Example: Ownership transfers on July 15, return is due the following April. Once it is complete, the best part is that you can reside in the home and live your life as usual.

After the predetermined number of years for the QPRT ends, ownership transfers to the beneficiaries as detailed in the QPRT. This is accomplished by registering a new deed that transfers residence from the name of the trust to the name of the beneficiaries and documenting this in the property’s land records.

The last step is to pay a fair market rent for the property if the previous owner wants to continue living there. The income will transfer more assets to beneficiaries free of gift taxes and will reduce the size of the taxable estate.