The Federal estate tax exemption is high enough, $5.43 million per person and double that per couple, that it only affects the very wealthiest people in the country – not even 1% – but an outdated estate planning technique meant to get around a much lower exemption in the 1980s and 90s has left a nasty surprise for anyone still using a qualified personal residence trust (QPRT).
“Nobody could have predicted what would happen to the estate tax exemptions, and I wouldn’t fault any estate planner that did this in the 90s, but now it’s a mess,” says Jessica Goldsmith, partner and chair of the trusts and estates department at Kurzman Eisenberg Corbin & Lever LLP.
It's no secret that this year has been a volatile one for the markets. The S&P 500 is down 18% year to date, while the Nasdaq Composite is off by 27% year to date. Meanwhile, the VIX, a key measure of volatility, is up 49% year to date at 24.72. However, it has spiked as Read More
Why QPRTs made sense in the 80s
Thirty years ago the estate taxes affected a much larger percentage of the population. Instead of basically $11 million ($5.43 million for each spouse), it was $600,000 per person and the surviving spouse couldn’t make use of his or her partner’s exemption. To reduce estate taxes, many people set up QPRTs that gradually transferred ownership of their homes to their children, eating into their lifetime gift tax exemptions to save on estate taxes down the road.